“The release of energy from splitting a uranium atom turns out to be 2 million times greater than breaking the carbon-hydrogen bond in coal, oil or wood. Compared to all the forms of energy ever employed by humanity, nuclear power is off the scale. Wind has less than 1/10th the energy density of wood, wood half the density of coal, and coal half the density of octane. Altogether they differ by a factor of about 50. Nuclear has 2 million times the energy density of gasoline. It is hard to fathom this in light of our previous experience. Yet our energy future largely depends on grasping the significance of this differential. “

- William Tucker, excerpted from his lecture, Understanding E=MC₂

William Tucker has powerfully explained how the future of technologically advanced civilizations depends upon a sophisticated ability to convert the highest energy densities into increasingly denser power performance, and in the process compacting the time and space necessary to do productive work.

In fact, Tucker wrote an excellent book about this, Terrestrial Energy: How Nuclear Energy Will Lead the Green Revolution and End America’s Energy Odyssey. In light of the excerpt from that book recently posted at Master Resource, I thought readers of this forum might find my review from two years ago (see below) of interest, particularly if they have not yet read Tucker’s book.

The Primacy of Energy Density

Rockefeller University’s Jesse Ausubel has demonstrated that the trend in energy usage continues along a decarbonizing trajectory. Improvements in technology combined with a communal desire to live longer and more healthfully have spurred this phenomenon. Given a choice, who wants to live in a town where thousands of chimneys cast off carbon by-products like sulfuric smoke and soot? Civilization will continue decarbonizing apace, whether this aligns with climate change alarmism, or not.

Connected to Ausubel’s idea is Vaclav Smil’s credible proposition that there is a fundamental societal chain reaction cascade involved with discovering energy densities, which then produce greater power densities, each generation of which leads to even greater energy/power densities, in ways similar to that described by Moore’s Law.

For the last 150 years, we have briskly moved beyond wood and wind, fire and horses to harness the energy within the electro-magnetic force that, among other things, generates electricity, which development continues and will become crucially important as science hones in on advancing the potential of nanotechnologies and the capacity of quantum computing, making our digital world seem quaint.

But to really get at energy densities that will empower planetary and interplanetary work, which is what the future will demand, we’ll require the energy of the greatest force we know, the strong nuclear force, the one that binds together the nucleus of atoms.

Of course, this initiative is well on its way, beginning with Einstein and Bohr more than a hundred years ago, continuing through the Manhattan Project, and made manifest contemporaneously by many nuclear power stations for the production of electricity, here and abroad. But…

Prometheus Bound

There are those who think nuclear power, with its vast density, is far too dangerous for the likes of mortals to use responsibly, similar to how the Greek gods felt about giving humanity fire. This has resulted in tightly bounding the Prometheus of nuclear technology in chains of such onerous regulation that the cost of the technology, in time and dollars, has, de facto, become prohibitive. It has also produced a quavering political atmosphere in the US that prompted President Jimmy Carter to outlaw the reprocessing of nuclear waste material, leading both to large stockpiles of the stuff that would otherwise not exist and recurrent political finger pointing about where and how to store it.

The nuclear industry does itself no favors when it nonsensically insists, for reasons of cupidity and political correctness, that renewables like wind are respectable players in the energy marketplace. For this idea gives succor to those who so dislike nuclear they would substitute wind for it, as is now the case with Angela Merkel’s Germany—a palpably bizarre outcome, where the German Colossus now seeks to be powered by the mythic giants of Spain’s greatest work of fiction, at a conservative cost of trillions of euros.

Recent events have only added to nuclear’s woes. New techniques for extracting Marcellus shale deposits have substantially reduced the cost of natural gas, leading to prices as low as $3 MMBtu. Many economists believe such a price leaves nuclear uncompetitive as a baseload source of power for electricity—despite having a national capacity factor approaching 95%.

Fukushima

And then there’s the Fukushima debacle. Although there are many who think the Fukushima nuclear event was a grand success story for the technology, because…

—Despite enduring one of the largest earthquakes ever recorded, eventuating in one of the worst tsunamis ever to hit Japan; despite decades of administrative dimwittery by Japanese nuclear bureaucrats; despite efforts by melodramatic media reports and fear mongering politicians; despite loopy projections from a medical journal that tied over 14,000 U.S. deaths to the Fukushima reactor (talk about bad science)—the Japanese Government, after screening over 160,000 people in the general population through March 2011 for radiation exposure, found no cases that affected overall health. None.

Virtually all the nearly 16,000 confirmed Japanese deaths were caused by the earthquake and tsunami. The Fukushima plant itself was antiquated and in need of upgrades—but no one wanted to spend the money. Still, radiation levels from the incident may prove not at all deleterious for people who were evacuated from the affected region and who wish to return.

U.S. Nuclear

Here in the U.S., the nation’s largest electricity grid, the PJM, has used nuclear power for nearly 40 percent of its electricity for many decades, without incident, or even much threat of incident. The US Navy’s nuclear fleet is the envy of the world.

Nonetheless, a climate of fear and new extraction techniques for energy densities appropriate for most contemporary power demand, leading to cheaper competitive fuels, will keep nuclear advances at bay for a time, at least in large parts of the West and certainly in the US.

This situation won’t last. At the time I wrote my review of Tucker’s book, natural gas was relatively expensive, for a variety of reasons, some of it even related to the market. Shale gas is a game changer today. Nonetheless, in the longer term, I don’t think it will appreciably modify the ultimate lure of nuclear, given its vast energy density, so many times greater than oil.

Moreover, it’s unclear how long natural gas prices will remain at these present low levels. And it’s uncertain how long the supply will last. Perhaps another generation or so. Perhaps another century. It will eventually be depleted.

The mining of energy density is what produces greater power density machines, as was the case for coal, gas, and oil. This tandem will cascade very rapidly in the future, creating new expectations for power that can only be met by increasingly higher power density machines, which can only be fueled by increasingly higher density energies, etc.

As Tucker explains, the highest energy densities are found in an atomic nucleus via the strong force. Solar derivatives like fossil fuels and hydro will likely continue to provide the bulk of our power density needs for several generations to come. However, although the energy densities here complement the energy densities from various chemical reactions (rockets to the moon, for example), they still pale beside those of the strong force.

Breakthroughs for safer deployment of nuclear power will not be long in coming, though, whether they’ll be in the form of enhanced thorium reactors, which would do away with uranium or plutonium, or smaller, modular “micro” nuclear plants delivering about a third of the installed capacity of current units working at scale. There are already many designs for improved fast breeder reactors. Tucker provides a sampling of the possibilities. Both China and India remain committed to a nuclear future and continue to invest in research and development that may soon lead to safer fission processes.

Conclusion

If past is prologue, what the world of the future will want is greater prosperity enabled by the highest power densities. To obtain that prosperity, culture will fabricate responsive and increasingly interactive machines powered by high-energy concentrates. Sooner than later, technology will cross a threshold of expectations that only nuclear power can meet, accelerating at warp speed the ability to do more work in less time in smaller spaces. More power means greater productivity.

Which means more clothing, food, and shelter for the entire world. It also means future Mona Lisas created by people now mired in bone-crushing poverty, as well as the exploration for Martian water. And more time to sip new blends of lunar coffees while discussing Zeno’s Paradox.

________________________________________________

Award-winning journalist Bill Tucker begins this important book with a fair-minded review of the evidence that human activity is contributing to the greenhouse effect implicated in accelerating the warming of the earth. He concludes that, while the science remains provisional and somewhat equivocal, annually dumping 30 billion tons of CO₂ into the atmosphere is likely to have some impact on climate—enough for reasonable people to be sufficiently alarmed about the practice to want it stopped, or substantially reduced. How to achieve this goal effectively while enhancing, even extending, technology that preserves the energy requirements of modernity is the subject of the book.

Energy enables modern society by heating our homes and businesses, providing for vast transportation systems, and producing electricity. Transportation, mostly in the form of automobiles, produces over 30% of our nation’s CO₂ emissions. Consumption of electricity accounts for 39% of all energy use in the United States, which includes nearly a third of the energy produced for heating and a tiny fraction now involved in transportation. However, because more than 70% of the power for electricity comes from the burning of fossil fuels, with 50% from coal alone (20% from natural gas, 2.5% from petroleum), electricity production emits 36% of all the greenhouse gasses humans dump into the atmosphere, with coal-fired plants contributing 30% of the total.

Only two of the five conventional power sources, hydro and nuclear, produce “clean” power, emitting no CO₂. As Tucker documents, though, hydro, perhaps the most effective of all power sources and still generating 7% of the nation’s electricity power, has already developed most of the best hydro sites while fomenting significant environmental damage, with each dam typically degrading hundreds of miles of sensitive watershed habitat.

The Sierra Club has opposed hydro for most of its existence because of this reason, with its founder, John Muir, fulminating about the aesthetic loss to his valley when the redoubtable Hetch Hetchy Dam was built nearly a hundred years ago. Nuclear plants, which provide 20% of the nation’s electricity, also produce at high levels without polluting the environment, but fears about radioactivity and the storage of waste material, not to mention the possibility that nuclear materials may be diverted for terrorist purposes, have given the industry such a problematic reputation that no new nuclear facilities have been built in the country for nearly thirty years.

The ten electricity grids that produce and transmit electricity in the continental US are mandated to provide reliability at affordable cost with high security. Electricity demand is today very predictable, always existing at some basic level, atop of which, as human activity ebbs and flows, mid and peak demand levels occur; each demand cycle also contains continuous demand fluctuations, as people and businesses turn their appliances on and off. Grid operators match power with demand at a better than 99% accuracy, dispatching heavy duty generators like nuclear, large coal, and, where it is abundant, hydro, to engage basic demand (which consists of about 40%-50% of a day’s electricity consumption), then deploying highly reliable but smaller units to meet mid and peak demand periods, as well as rapidly-responsive generators to balance demand flux.

Terrestrial Energy is a marvelously told tale presenting the ineluctable case for expanding the role of electricity to more than 50% of our total energy use, with nuclear as the primary supplier for basic demand, replacing coal—in the process substantially reducing our production of greenhouse gasses and other pollutants. Tucker shows this is no fantasy, since France (and Sweden) has for years harnessed nuclear for this purpose, giving France the second-lowest level of CO₂ emissions in Europe (Sweden is first). With clean burning nuclear providing much of our electricity, battery-powered automobiles (assuming significant future improvements in their performance) and other transport can simply be recharged by plugging into the grid, thus also avoiding the CO₂ from our present fleet of internal combustion engines.

Tucker not only demonstrates how nuclear facilities achieve stunning performance, given that nuclear energy is two million times more potent than the energy contained in fossil fuels, which are in turn exponentially more powerful than renewable fuels; he also demythologizes the nattering, well-intentioned concerns about their safety. He summons the ghost of Carl Sagan: we’re all “star stuff,” with radioactive heat forged in supernova explosions, then settling over everything, including our own sinew, providing Earth’s internal heat that makes life on earth possible. He shows that radioactivity is as natural as air, and that radiation is merely energy in motion—it’s all around, and coursing through us every second. The issue of concern is one of dosage.

To determine “safe” levels, Tucker examines the effects of the accidents at Three-Mile Island and Chernobyl, and looks at epidemiological studies in the wake of the nuclear bombing of Japan, providing sober context for understanding, from a scientific perspective, what the health risks for nuclear really are. Even more intriguing, he cites several studies focusing upon hormesis—the idea that chronic low doses of radiation are beneficial, stimulating the immune system. As for “waste” material, Tucker proves the concern is a bagatelle, for nuclear fuel can be almost wholly reprocessed, as France does it.

For those seeking a preview about what the next several years may bring in terms of energy policy, go directly to Chapter 15, “The California Electrical Crisis.” California’s penchant for “renewables” mirrors the interest in those technologies today. Despite over 15,000 huge wind turbines and massive investments in solar technology, “the state found itself in the midst of an electricity shortage in 2000—something no other advanced nation has ever experienced.”

One consequence of more than 25 years of emphasizing renewables and conservation, following that coquettish pied piper of “soft energy,” Amory Lovins, is that Californians now pay among the highest prices for electricity in the nation, getting 41% of their electricity from expensive natural gas, while continuing to increase their carbon emissions. Tucker’s account ought to be the basis of a screenplay for a Monty Python full-length feature, with enough incompetence, venality, and wishful thinking to make the novelist/essayist Tom Wolfe happy.

Even in the United States of Amnesia, it should be enough to provide a lesson in precisely what not to do in the quest for an effective energy policy that drastically reduces CO₂.

Tucker could have been clearer about the limitations of today’s mainline “renewables”: wind and solar. Wind especially. For it’s incompatible with demand cycles, typically producing most when demand is least; its relentless skittering destabilizes the grid, making conventional generators work harder to balance it, with thermal consequences that largely subvert any CO₂ emissions offsets induced by wind energy; and it produces no effective capacity–prescribed levels of energy on demand–with the consequence that it can never take the place of any reliable conventional generators that do produce effective capacity, including coal. All conventional generators produce their rated capacities, or a desired fraction thereof, when dispatched to do so.

However, no one can be sure of how much wind (or solar) will be available at any future time. Neither wind nor solar can satisfy base or peaking demand, since they’re not dispatchable or dependable.

Any journalist who these days can gracefully weave together an accurate account of the reciprocal nature of the speed of energy (radiation), matter, time, and distance with Huber and Mills’ laws of efficiency deserves the greatest respect. He also makes use of such cultural treasures as Blondie at Tudbury’s and Jubilation T. Cornpone. Terrestrial Energy is an honest, even wise, undertaking in the best tradition of journalism in a democracy, for successful democracy insists upon an informed citizenry. It’s at risk when leaders base policy on hot air and hokum, as the recent California energy history suggests.

Those concerned about a better energy future should recommend this book to all in their circle, presenting it as well to politicians, policy wonks, environmental leaders, and media representatives. Three cheers for Bill Tucker.

The New York Times ran an article highlighting the findings, but the article was so criticized that the newspaper’s editors responded with what amounted to an apology.

NC WARN’s startling, untenable conclusion is the subject of this post, which is based on a longer paper.

The group’s central graph (Figure 1), which took the media hook, line, and sinker, shows a steep decreasing cost curve for solar over time coupled with a pronounced increasing cost curve for nuclear.

Figure 1. Generation costs from solar and nuclear power according to Blackburn and Cunningham (2010).

But nuclear power is less, not more, expensive than solar power. It is also reliable, or in industry terms, dispatchable, which adds value that is not reflected in simple cost comparisons.

Flawed Methodology

NC WARN estimates the cost of nuclear power by increasing the estimates from one single piece of literature (Cooper 2009). (We will discuss this later.) With regard to the costs of solar power, they employ the following formula:

Capital Cost ($ per kWh) = Project Cost ($) x Amortization Factor

Generating Capacity (kW) x Capacity Factor (%) x 8760 hours

They assume a Project Cost of US$ 6,000 /kW, which is fair.

They define the amortization factor – i.e. “the annual payment due on each borrowed dollar of investment” – as the following ratio:

Amortization Factor = i

1 – (1 + i)^-n

Where i is the borrowing rate (which they assume at 6%) and n is the amortization period in years (which they assume equal to 25). These assumptions are fair.

A further step corrects the Generating Capacity “by a derating factor (15%) to reflect the line-loss that occurs when a central inverter converts direct current (DC) to alternating current (AC) for use”.

So far, so fair.

So, what is unfair?

The first flaw regards the Capacity Factor, which “indicates the percentage of hours in a year that a solar installation generates electricity output”. Blackburn and Cunningham assume a Factor of 18%, which they define “a reasonable industry standard for North Carolina”. That means that solar panels are supposed to work, on average, 1,577 hours per year. As we will show later, this represent a gross overestimate of the observed capacity factors both in the US and in North Carolina.

But let’s ignore this point and accept, for a moment, the 18% capacity factor. Let’s put the numbers into the formula. Would you expect to find the value from the graph, 15.9 cents / kWh? Try yourself! Assume, as Blackburn and Cunningham do, “3 kW residential solar installation, $6/W installed cost, 6% borrowing rate, 25-year amortization period, 18% capacity factor, 15% derating factor”. Here’s the math:

Capital Cost ($ per kWh) = $ 18,000 x 0.078227 = 35.0 cents

(3 kW x 0.85) x 18% x 8760 hours

How is that possible? After all, 35.0 cents is not just well above the 15.9 cents under which solar power is more convenient than nuclear power: it is also well above the highest projections for the cost of nuclear power. In the next paragraph we will expose the trick.

Improperly Applied Subsidies

The most glaring problem with NC WARN’s report is its use of subsidies in calculating the costs of electricity. NC WARN decided to arbitrarily include subsidies for solar power to calculate its costs and at the same time not take into account subsidies for nuclear power. Moreover, the report fails to admit that solar subsidies in NC are much larger than nuclear subsidies.

Regarding solar power, by NC WARN’s own calculations, solar power costs 35 cents per kWh without first taking into account subsidies. They then apply two state and federal subsidies to significantly lower that cost. Between the 30 percent federal tax credit and the 35 percent state tax credit for solar power, the cost per kWh is reduced to 15.9 cents per kWh, which makes it less than their estimates of nuclear power (which will be discussed below).

If we took this logic to the extreme, then a 100 percent tax credit would make the generation of solar power completely free. They ignore the fact that there are still costs for generating solar power or nuclear power regardless of subsidies—subsidies do not make costs disappear.

It is true that electricity customers may pay less as a result of the subsidies, but that is only in their capacity as electricity customers. They will pay for those costs through the taxes that are necessary to give subsidies to solar power providers. This may have relevant distributional consequences: for example, since the well-off have, usually, larger houses than the poor, and so larger roofs per capita, the installation of rooftop solar panels (explicitly promoted by NC WARN) is likely to result in a wealth transfer from the poor to the rich.

By itself, the use of subsidies in their methodology undermines NC WARN’s entire report. Even applying their subsidy approach though, NC WARN does not indicate how subsidies reduce the costs of nuclear power in the same manner as solar power. In the report, they discuss subsidies to nuclear power, but never explain how those subsidies are translated into a lower cost for nuclear power. Therefore, their report unfairly gives solar power the “benefit” of subsidies but nuclear power does not receive the same benefit – indeed it is explicitly blamed for getting some subsidies.

Ironically, all the subsidies to solar power are not even applied. For example, NC WARN argues that federal research into nuclear power is a subsidy but they never take into account the research money that goes to solar power. The subsidies are arbitrarily applied.

Inconsistent Estimates with Reliable Sources

When coming up with very unusual results, as NC WARN has done when comparing solar power to nuclear power, any report needs to explain why the methodology used is superior to other credible sources. NC WARN failed to do this.

According to the United States Energy Information Administration (EIA), new solar power is more than three times the cost of nuclear power (as seen in Figure X). The EIA estimates solar power to be 39.6 cents per kWh, which actually is in the ballpark of NC WARN’s own estimate (35 cents per kWh)) before their misapplication of subsidies. EIA estimates nuclear power to be 11.9 cents per kWh while NC WARN apparently estimates it at anywhere from 16-22 cents, depending on what section of the report one is reading. It is the misapplication of subsidies with solar power that flips everything on its head.

Source: “Levelized Cost of New Electricity Generating Technologies,” Institute for Energy Research, May 12, 2009, updated Feb. 2, 2010, using data from the Energy Information Administration’s Annual Energy Outlook 2010.

Ironically, the Cooper study that NC WARN heavily relies on for calculating nuclear costs draws a fatal conclusion for NC WARN:

Solar photovoltaics are not cost competitive at present, with several studies finding them two to five times as expensive as nuclear reactors.

Exaggerated the Capacity Factor of Solar Power

Capacity factor is a measure of how much electricity is actually produced in a given time period compared to what could have been produced if the electricity source was generating electricity 100 percent of the time. For example, if a plant could have generated 1,000 MWh over the course of a year if operating at 100 percent but only generates 200 MWh, then the capacity factor is 20 percent.

Solar power has an extremely low capacity factor. According to Progress Energy, the capacity factor of solar power in North Carolina is only 16 percent (nuclear power has a capacity factor of 91 percent). As shown in Table X, EIA data shows that the capacity factor in the United States is generally below 16 percent. The average for the 5-year period of 2005-2009 is a capacity factor of 15.4 percent.

NC WARN however assumes a capacity factor of 18 percent for solar power when calculating its costs. There is no explanation as to why they use this higher number. This may not seem like a big deal, however, when applying Progress Energy’s conservative 16 percent number to the cost calculations, solar power costs (without taking into account subsidies) increases from NC WARN’s 35 cents per kWh to 39.4 cents per kWh. Coincidentally, this is basically the same cost for solar power that the EIA calculated (39.6 cents per kWh).

Table I shows data on installed capacity, generated energy, and capacity factor for the US in the last 5 years.

Utilities Do Not Care About Money?

To NC WARN, solar power is less expensive than nuclear power, but utilities want to hang-on to nuclear power and avoid solar power even at their own expense. According to NC WARN, “The state’s largest utilities are holding on tenaciously to plans dominated by massive investments in new, risky, and ever-more costly nuclear plants, while they limit or reject offers of more solar electricity.” They later argue “Duke Energy has turned down a host of competitively priced proposals.”

If solar power really is less expensive than nuclear power, utility companies are going to jump at the opportunity to install solar power to the electricity grid. Further, North Carolina’s misguided law mandates that utility companies generate 7.5 percent of their electricity from renewable energy. Utility companies also are specifically required to generate .2 percent of their electricity from solar power. To meet these legal requirements, utility companies would not reject the use of solar power but instead would embrace this technology. The reality is utility companies do not want to use solar power because even among renewable energy sources, solar power is by far the most expensive source of electricity and not remotely competitive (see Figure X).

Solar power will only succeed when it will be able to meet some specific need that the market will be willing to reward. NC WARN themselves seem to realize this when they claim that “the trend cost decline in solar technology has been so great that solar electricity is fully expected to be cost-competitive without subsidies within the decade.” If that is true, why should the public pay extra-costs to install solar photovoltaic panels with an average life expectancy of 25 years, if we already know that solar power will be cheaper a few years from now? This question is neither answered, nor considered in their study.

Source: “Levelized Cost of New Electricity Generating Technologies,” Institute for Energy Research, May 12, 2009, updated Feb. 2, 2010, using data from the Energy Information Administration’s Annual Energy Outlook 2010.

Solar and Nuclear Power are Interchangeable?

NC WARN gives the impression that there is a choice between solar power and nuclear power. This is a fallacy. Regardless of whether solar power is used, there will be a need for conventional sources of electricity such as nuclear power.

Solar power, like wind power, are intermittent and unpredictable sources of energy. Since the sun does not always shine, electricity often is not being generated (for example, by night or in cloudy days). Even when the sun does in fact generate electricity, this does not mean there will be a need for it when produced.

Due to the unreliability of solar power, it is not a source for baseload generation of electricity (the electricity needed to meet regular demand) and since the sun does not shine on demand, it does not provide a source to meet peak demand for electricity (even though it is true that peak load is likely to occur when sun is most likely to shine, i.e. around noon). As a result, it has far less value than conventional sources of electricity. Even if the costs were equal for nuclear and solar, the value of nuclear would be far greater than solar power.

For example, a car and a bicycle are both modes of transportation. If they both cost $20,000 each, this does not mean their value is the same (at least to most people). A bicycle is unable to take the family to the movies or allow the driver to take long trips in a short period of time. The public will purchase a car for $20,000, but would laugh at the idea of purchasing a bicycle for $20,000 because the value of a car is far greater than a bicycle—this is the same difference between nuclear power and solar power.

Conclusion

The public and policymakers need accurate and reliable information about the costs of energy. They are not served by extreme and unsupported claims made by anti-nuclear power advocacy groups.

Nuclear power does have some questions regarding costs—that is a fair point to make. However, this point does not diminish the critical importance of nuclear energy and it certainly does not change the fact that it is far less expensive and more reliable than solar power.

Policymakers should not try and pick winners and losers among various technologies. Maybe someday solar power will be cost competitive with nuclear power and have real value for electricity customers. Until that day though, policymakers should not force solar power into the electricity mix at the expense of low-cost and reliable electricity.

REFERENCES

CLERICI, A. (ed.) (2007). The Role of Nuclear Power in Europe, London, World Energy Council.

COHEN, B.L. (1995). “The Costs of Nuclear Power”, in Julian L. Simon (ed.), The State of Humanity, Malden, MA, Blackwell Publishers, pp.294-302.

COOPER, M. (2009). “The Economics of Nuclear Reactors: Renaissance or Relapse?”, Institute for Energy and the Environment, Vermont Law School, available at www.vermontlaw.edu.

IER (2009). “Levelized Cost of New Electricity Generating Technologies” updated Feb. 2, 2010, available at www.instituteforenergyresearch.org.

NC WARN (2010). “Solar and Nuclear Costs. The Historic Crossover”, NC Warn, available at www.ncwarn.org.

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From the New York Times posted in response to the article:

Editors’ Note: August 3, 2010

An article published July 27 in an Energy Special Report analyzed the costs of nuclear energy production. It quoted a study that found that electricity from solar photovoltaic systems could now be produced less expensively than electricity from new nuclear power plants.

In raising several questions about this issue and the economics of nuclear power, the article failed to point out, as it should have, that the study was prepared for an environmental advocacy group, which, according to its Web site, is committed to ‘‘tackling the accelerating crisis posed by climate change — along with the various risks of nuclear power.’’ The article also failed to take account of other studies that have come to contrasting conclusions, or to include in the mix of authorities quoted any who elaborated on differing analyses of the economics of energy production.

Although the article did quote extensively from the Web site of the Nuclear Energy Institute, an industry group, representatives of the institute were not given an opportunity to respond to the claims of the study. This further contributed to an imbalance in the presentation of this issue.

And with this two-part scheme, games are played. Wind generators can bid a low price into the pool only to receive a higher FIT, which gives them an incentive to underbid. This might reduce the pool price but not overall cost to Germans for electricity.

Investing in New Generation: What Makes Sense?

If a generation resource is a good investment for its developers then it must return a profit to them.  In a normal electricity market this profit comes from supplying a segment of the demand (peak, intermediate/cycling, baseload) from a plant that is efficient technically and financially.

For existing plants and determinations of electricity costs in the here and now we can figure out the average cost of supplying electricity by calculating the weighted average cost of supply for each time period in the market every day.  If the addition of one generation source raises this weighted average without improving service quality or reliability, then it is not economical and would generally not be chosen in a well-functioning market.

But what about the future?  Electricity suppliers must invest large sums in new generation plants with the expectation that these plants will meet demand at the least cost.  This cannot be known with certainty, and mistakes are made all the time, especially when government policy and rent-seeking drive investment choices.

Transmission network operators – those in charge of the “natural monopoly” part of the power business – try to reduce the risk attendant to future supply by figuring out the least costly way to supply power and energy to their customers in the future, including the wires to transmit the electricity.  They have to take account of a long list of considerations: investment cost, fuel supply, emissions and licensing regulation, proximity to existing load centers and transmission nodes, transmission congestion – you get the idea.

The transmission system operator also has to pay attention to public policy – renewable energy mandates (“portfolio standards”), federal tax incentives (producer tax credits for wind and solar), feed-in tariffs, powerful politicians who do not want their vistas impaired – in a host of ways that directly impact their views of an optimal future generating system.

What Does the Wise Transmission Operator Do?

A wise investor in generation will first figure out what is economic to build? what are the physical constraints on the system? and finally, what limitations will public policy put on otherwise least cost generation choices?

A Case Study of “Germania”[i]

Let us imagine that we have a rather large and wealthy country to play with, one that currently has about 129 GW of installed generation capacity.  Further, we can imagine that this wealthy country, responding to its powerful environmental movement, has decided to

(i) phase out nuclear power;

(ii) limit future coal power-plant operations;

(iii) build a lot (a lot!) of wind generation plants; and

(iv) bring in most of its gas supply from Russia at prices linked directly to refined oil products and crude (i.e., high and volatile).

Such a country would have a great deal of baseload generation capacity – coal + lignite + nuclear – perhaps half of total generation capacity (US has coal + nuclear capacity of about 40%).  Suppose further that green thinking had created incentives (FIT) that pushed wind up to about 20% of total nameplate capacity.  Most of the country’s hydro generation and imports are soaked up by wind mirroring and shadowing.

With all of that generation capacity essentially independent of fuel price trends it is no accident that the cost of generating electricity in Germania is (i) high; and (ii) not responsive to changes in oil and gas prices.  At current world oil prices the average cost of electricity generation in Germania is about 6.7¢/kWh (7.8¢/kWh if crude reaches $110/bbl).

Germania’s Least-Cost Generation System

With natural gas still expensive – kind of like burning oil but more efficiently – what does a least cost generating system for Germania look like in 2020, about the time the initial wave of early “teens” investments go on line?

The first thing you do is throw out the phase outs – keep the existing nuclear and efficient coal plants in operation until you have a more cost-effective substitute;

Second, phase out your highest cost oil plants – heavy fuel oil and old combustion turbines (2.6 GW)

Third, build some new, more efficient coal plants (1.6 GW) and CCGT units (4.5 GW), and nuclear (4 GW), reduce emissions per kWh by more than 30% in the new coal plants;

Fourth, operate existing wind (28 GW) but do not build new generation from that source.

Total annual cost in 2020: $48 billion at 6.7¢/kWh for average supply cost and 6.6¢/kWh for new supply.

Back to Our Previously Scheduled Programming

Everyone in Germany’s power sector knows that this least cost system is simply some renegade economist’s fantasy.  Back in the Real World of Energy Policy, there are several important considerations that must be accommodated:

Stay clean – phase out at least 25% of older coal and lignite plants, make permitting of new coal plants difficult;

Stay green – stay the course on wind energy; and

No nukes – continue to phase out nuclear power.  Build only enough new nukes to keep the Gauls happy.

So what does Germania get for its $53 billion annual outlay for electricity (at 7.6¢/kWh average supply cost and 7.8¢/kWh for new supply)?

Less coal and lignite – existing units fall to 45 GW from 58 GW, new coal rises to 3.1 GW to make up for some of the lost legacy capacity;

Less nuclear power – existing nuclear capacity falls to 15 GW (from 19 GW), new nuclear capacity falls to 2.7 GW from 4 GW in the least cost case;

More gas – 6.5 GW of new CCGT, up from 4.5 GW in least cost case;

More wind – another 17.5 GW, for a total of 35.5 GW of wind, 25% of total nameplate capacity; and

More imports – enlarged interconnection with Benelux and Denmark/Norway is only cost effective way to shadow additional wind and meet peak demand.

And if the price of oil rises to $110/bbl by 2020, then this system will cost Germania $62 billion annually at 8.8¢/kWh.

The True Green Scenario – phase out 50% of coal and nukes, double wind installations, increase imports – costs about 7.9¢/kWh on average, 8.3¢/kWh for new supplies and carries annual costs of $56 billion.  This option requires 15.6 GW of new CCGT, 2.1 GW of new combustion units, 10.6 GW of import capacity and operates existing HFO units at 100% of capacity (!), even building a couple of new HFO plants to meet demand – not green, not cheap and not feasible (it only solves inside the box).  And by the way, higher oil prices for this beauty will cost $66 billion/y at 9.3¢/kWh.

Does ‘Green’ Always Have to Hurt?

Easing off the green pedal a bit creates enough breathing room in Germania to generate a lot of clean electricity at a much lower cost.  A more moderate program, even with 10 GW of new wind, can be done at a far lower cost with just a few adjustments:

Slow the phase out of existing coal and nuclear plants – keep 85% of existing coal and nuclear plants in operation in 2020;

Build new coal and nuclear plants – reduce emissions per kWh and burn less coal overall, and improve the efficiency and security of the nuclear fuel cycle;

Import more – let more medium term supply come from lower cost Benelux and Scandinavian suppliers to mirror/shadow wind and follow load.

A more moderate program of this sort could supply Germania for about $49 billion annually at an average cost of 6.9¢/kWh.  Even higher oil prices do not hurt as much as in the more aggressive scenario, with $110/bbl crude oil increasing total annual costs to $56 billion at 8.0¢/kWh.[ii]

As a Great Philosopher Once Said, “A man’s got to know his limitations”

In a world of unlimited wealth, where electricity can be stored and plants can be built instantaneously on a whim, a complete remake of a large power system seems feasible and even desirable to some.  Back in the real world, where everything takes time, costs money and different sources of electric power are not perfect substitutes for one another, such ambitions are difficult to realize.

Germania set up too many targets on too short a time frame.  The result was a series of conflicting mandates and constraints – close it down; no, we need it, keep it open; will the Jutes cooperate on supply? What happens to our gas supply when “bad weather” rolls in from the East (as it eventually does in Germania)?

A cleaner, greener power supply system is possible over a longer period of time at a far lower cost than a crash program.  Orderly replacement of older coal plants with more efficient and cleaner new ones makes sense given the country’s resources, geography and demand patterns.  As in the US a crash program to overhaul the system will ultimately force increased reliance on older, less efficient coal plants; it ignores microeconomic rationality for chimerical goals and wastes a lot of money and energy in the process.  Or to paraphrase that revered Soviet philosopher, “you may not be interested in markets, but markets are interested in you.”  Germania ignores market forces at its own peril.

[ii] The cost of new supply is below the average cost of supply by about 7% for this moderate scenario, while the “Green” future shows new supply above average cost by about 2-3%.

Reprocessing and Recycling in the U.S.

The reprocessing of nuclear fuel first began in the U.S. in January 1943. The Bismuth Phosphate Precipitation Process was used for recovering macroscopic quantities of plutonium. The REDuction-OXidation (REDOX) process was the first successful solvent extraction process to recover both uranium and plutonium; it was further refined into the Plutonium and URanium EXtraction (PUREX) process, which has become the most common and fully commercialized liquid-liquid extraction process for the treatment of spent nuclear fuel (SNF).

In order to support a self-sufficient commercial nuclear power industry in the 1960s, the Atomic Energy Commission (AEC, circa 1946 to 1974)—the predecessor regulatory agency to the NRC (1974 to present) and the Department of Energy (circa 1977 to present)—encouraged the transfer of nuclear fuel reprocessing from the federal government to private industry. The three privately owned reprocessing plants constructed were the Western New York Nuclear Service Center (West Valley, N.Y.), Midwest Fuel Recovery Plant (Morris, Ill.), and the Barnwell Nuclear Fuel Plant (Barnwell, S.C.).

West Valley, N.Y.: The regulatory lesson. The West Valley facility started reprocessing SNF assemblies using the PUREX process in 1966, and by early 1972 it had reprocessed nearly 1,000 SNF assemblies. However, throughout 1973 and 1974, the AEC adopted increasingly rigorous safety criteria for nuclear facilities, mainly related to seismic issues. In September 1976, West Valley closed due to the economics of complying with heightened regulatory requirements applied retroactively.

Morris, Ill.: The technical lesson. The Midwest Fuel Recovery Plant (MFRP), completed in mid-1971, became a prototype for intermediate-size reprocessing plants to be built near existing nuclear power plants in an effort to reduce transportation costs and public acceptance obstacles. In addition, the designers attempted to minimize the generation of radioactive liquid effluents by avoiding, to the maximum extent practicable, the use of solvent extraction. The facility utilized an Aquafluor process that featured only one stage of solvent extraction and used remotely operated equipment. The waste was to be calcined, placed into containers, and stored in a pool awaiting shipment to a federal repository. During the design and construction phases, processes were demonstrated in the laboratory with bench-scale testing before being incorporated into the facility.

Unfortunately, equipment failures and technical problems prevented the plant from achieving full-scale operation. Its longest sustained run was 26 hours, and in March 1974 all operations were suspended. In July 1974, the MFRP was determined to be inoperable in its as-built configuration and to require a second decontamination solvent extraction cycle that would take a minimum of four years to complete. Finally, given the projected costs and the increasing regulatory scrutiny at West Valley, operations were terminated in August 1974. The MFRP closed without ever having reprocessed a single SNF assembly. It is currently used as an independent wet-pool storage installation.

Barnwell, S.C.: The political lesson. The Barnwell Nuclear Fuel Plant (BNFP) was the first large-scale commercial reprocessing facility in the U.S. consisting of:

· A fuel-receiving and storage station.

· A separations facility to chemically process SNF assemblies into liquid uranium, liquid plutonium, and liquid high-level waste (HLW) using advanced PUREX technology.

· A uranium hexafluoride facility to convert the liquid uranium into uranium hexafluoride.

· A plutonium conversion facility to convert the liquid plutonium to an oxide.

· A waste solidification facility to solidify the liquid HLW and store it prior to shipment to a federal repository.

The BNFP separations and uranium hexafluoride facilities were finished and undergoing preoperational testing when the NRC terminated all licensing actions on December 23, 1977, as part of U.S. policy to defer indefinitely the reprocessing of commercial SNF in response to proliferation concerns.

The “Decision” to Defer

During the 1976 presidential election campaign, critics raised concerns over the acquisition of plutonium from civilian nuclear power programs, the proliferation of nuclear weapons, and controls over exporting nuclear technology. In response to these concerns, and just prior to the 1976 election, President Ford announced a major decision by the U.S. government calling for a temporary halt to reprocessing that was aimed at stopping the proliferation of nuclear weapons capability.

In 1977, the Carter Administration extended the moratorium into a long-term policy to defer indefinitely the commercial reprocessing and recycling of plutonium produced in U.S. nuclear power plants. As a result of this decision, approximately 97% of the recoverable uranium and plutonium from SNF became nonrecoverable waste products.

Although the goal in principle was desirable, it ultimately eliminated all U.S. commercial reprocessing. In spite of the U.S. position, reprocessing continued elsewhere in the world, causing the U.S. to lose much of its influence in international nonproliferation efforts.

In October 1981, President Reagan lifted the indefinite ban on U.S. commercial reprocessing activities. However, even overlooking the negative history of the West Valley, Morris, and Barnwell plants, the availability of low-cost uranium, numerous plant cancellations, and premature shutdowns eliminated any interest in and financial incentives to reprocess SNF. By 1993, President Clinton had reaffirmed the U.S. deferral policy that discouraged reprocessing and research.

Reprocessing Around the World

As in the U.S., reprocessing programs were started elsewhere in the world in order to support defense and nuclear energy programs. Currently, reprocessing and recycling is conducted in France, the United Kingdom, Japan, Russia, India, and China; Germany and Belgium have conducted pilot activities. Several facilities provide reprocessing and recycling services across national boundaries. Those facilities use an optimized PUREX process that separates uranium and plutonium and encapsulates the remaining transuranics (such as americium, neptunium, and curium) and fission products into a vitrified waste form.

For example, in France, the mission of the AREVA La Hague plant, which entered service in 1966, is to reprocess SNF. Reprocessing consists of separating and conditioning the various components of the SNF for recycling. Approximately 97% of the used fuel is recyclable when it leaves the reactor—96% as uranium and 1% as plutonium—while 3% is nonreusable waste materials and fission products. Therefore, natural uranium resources can be conserved, and the volume and toxicity of the final waste materials can be significantly reduced by treatment and conditioning specific to each type of waste.

The AREVA La Hague plant has a commercial reprocessing capacity of 1,700 metric tons of SNF per year, equivalent to annual SNF discharges from 90 to 100 light water reactors (Figure 1). For more than 20 years, AREVA La Hague reprocessing agreements have been in effect with the French nuclear program, Japanese power companies, and 29 European power companies, which are located in Germany, Belgium, Switzerland, and the Netherlands. From 1990 to 2007, the La Hague site has reprocessed approximately 23,600 metric tons of SNF for the recovery and recycling of uranium and plutonium for new fuel. The waste products consisting of transuranics and fission products are then vitrified for long-term storage. The volume of material requiring repository disposal is reduced by a factor of six compared with directly disposing of SNF.

1. AREVA operates a state-of-the-art used nuclear fuel reprocessing center in La Hague, France, that accepts fuel from nuclear plants across the European Union and Japan. Courtesy: AREVA

According to Dr. Alan Hanson, executive vice president, technology and used fuel management for AREVA (Bethesda, Md.), the economics of recycling can vary. “It is clearly economical to recycle aluminum because of the huge energy costs required to make aluminum, but it may be marginally economical to recycle paper. Nevertheless, it is the right thing to do. In the case of recycling used fuel, you can eliminate the need for 25% to 30% of new uranium. In addition, by reprocessing, we convert the waste form, primarily comprised fission products and transuranics, into highly stable vitrified glass that we believe is a better durable waste form than the fuel assembly itself.”

The COEX Process

Under GNEP, various reprocessing and recycling options have been proposed for separating SNF constituents into several product streams. Hanson stated that AREVA has proposed a recycling strategy based on a new integrated co-extraction (COEX) process (Figure 2).

2. In the AREVA COEX recycling process the used nuclear fuel is separated into three major streams: uranium-plutonium, uranium, and fission products and minor actinides. The COEX process does not separate out pure plutonium, which reduces the risk of its being used to build nuclear weapons. Source: AREVA

Whereas the PUREX process was originally designed to purify plutonium for weapons purposes, the COEX process does not separate pure plutonium at any point in the recycling plant. COEX consists of two colocated processes: the treatment process and the mixed oxide (MOX) fuel fabrication process. One additional attraction of MOX fuel is that it provides a way to dispose of surplus weapons-grade plutonium in the current U.S. fleet of conventional light-water reactors (LWRs).

In the COEX treatment process, SNF is separated into three major streams:

· Uranium-plutonium, extracted together and then turned into MOX fuel.

· Uranium, which is sent to external facilities for purification, conversion and reenrichment, and fabrication of additional recycled fuel.

· Fission products and minor actinides, which are vitrified into glass logs, stored on site as HLW, and eventually disposed of in a licensed repository.

In the COEX process, the uranium-plutonium mix is turned into MOX fuel for use in LWRs. Hanson commented that “The uranium-plutonium output stream is precipitated and co-precipitated and never, either as a product or in the piping in the facility, is pure plutonium. In that regard, COEX meets the nonproliferation requirements of GNEP by not producing pure separated plutonium, and the output product is one step further away from being usable for weapons purposes.”

The next generation of reprocessing and recycling plants in France that will ultimately replace the La Hague facility will use the COEX process.

Here in the U.S., AREVA announced in May 2008 that Shaw AREVA MOX Services LLC and the DOE had signed an agreement implementing construction of the Mixed Oxide (MOX) Fuel Fabrication Facility at the Savannah River Site in Aiken, South Carolina. The facility will remove impurities from surplus weapons-grade plutonium and mix it with uranium oxide to form MOX fuel pellets for reactor fuel assemblies. The assemblies then will be used in commercial nuclear power reactors. The facility’s design is based on AREVA’s La Hague and Melox fuel treatment facilities in France. From a physical protection perspective, the self-protecting, highly radioactive nature of the used MOX fuel will prevent direct handling of the assemblies, which will deter diversion of the residual plutonium.

U.S. Missed the SNF Boat

The closed fuel cycle option that involves reprocessing and recycling SNF has gradually gained recognition thanks to more than 40 years of demonstrated operational experience in France and a higher level of reliable economic data from actual operations. The Boston Consulting Group conducted an independent study funded by AREVA to review the economics associated with the closing stages of the once-through and recycling strategies. Proprietary data was obtained from AREVA, which reflected more than 20 years of nuclear materials reprocessing and recycling experience.

The study compared the long-term cost of recycling SNF against the possible cost of a repository handling the same SNF in a once-through strategy. In one scenario, the overall discounted cost of recycling SNF was on the order of $520/kg. This result was comparable to the cost of a once-through strategy, estimated at $500/kg, especially considering uncertainties, such as the price of uranium and repository costs.

Examining another possible scenario, the consulting group considered a new integrated recycling plant scheduled to open in 2020 that would use the COEX process, handle 2,500 metric tons per year of SNF, and be combined with a repository (such as Yucca Mountain) for storing HLW and legacy SNF. This scenario was projected to have a total net present cost of $48 billion to $53 billion. This result is equivalent to the net present cost of an exclusive once-through strategy with Yucca Mountain and an additional repository estimated at $47 billion to $50 billion.

Furthermore, the projected total undiscounted life-cycle cost for the recycling strategy would be approximately $113 billion, compared to approximately $124 billion to $130 billion for the once-through strategy. Given the intrinsic uncertainties used in the study, and the fact that almost 30 years have elapsed since President Reagan lifted the indefinite ban on U.S. commercial reprocessing activities, the economics of a recycling strategy are comparable to, if not better than, those of a once-through strategy.

International SNF Reprocessing

Through international agreements and contracts, and following International Atomic Energy Agency (IAEA) regulations, it is very common for European companies to ship their SNF by rail to La Hague for reprocessing and recycling. For example, 235 metric tons of SNF from Italy’s nuclear power plants will be sent to France for reprocessing.

However, French nuclear law does not allow AREVA or any other entity to take waste and keep it in France. Although the recovered uranium and plutonium can be recycled for new fuel, the vitrified waste products are returned to the country of origin or another third party, as long as it is not in France. Therefore, Italy has to take back its vitrified waste products at some point in the future, but no later than 2025 (Figure 3). Other countries that ship their SNF to France for reprocessing must adhere to the same requirements.

3. The vitrified waste is kept in storage cells located below the floor at the La Hague facility. Courtesy: AREVA

Overseas shipments of another country’s SNF and shipments returning the vitrified waste for disposal must use specifically modified ships that adhere to the International Code for the Safe Carriage of Packaged Irradiated Nuclear Fuel, Plutonium and High-Level Radioactive Wastes on Board Ships (INF Code).

Hanson indicated that because processes are in place for a country to export its SNF and re-import its vitrified waste for disposal, this option could help the U.S. alleviate its SNF storage problem. However, international agreements would need to be developed between the NRC and France’s equivalent regulatory agency, the Nuclear Safety Authority (ASN).

“Furthermore, there is a well-utilized international program through the IAEA for transporting nuclear materials,” Hanson noted. “However, every nation that adopts these regulations tends to modify them in practice to meet their own needs. Because of that, there is a difference between the NRC’s and France’s regulations to certify nuclear transport casks. In practical purposes, there is no existing transport cask that has been licensed by both the NRC and the ASN. So there is no existing fleet of casks to move the fuel today between the United States and France. Possibly some of the existing fleet of transport casks could be adopted for this purpose, but there would need to be some up-front engineering and licensing considerations that must be worked out. Still, the biggest challenge in making this option economically justifiable is the cost of the marine transport of the used fuel and vitrified waste.”

Hard Lessons Learned

It remains unclear if a logical and politically acceptable path toward developing a national, long-term storage facility for SNF and HLW  or construction of a fuel reprocessing facility is possible in the U.S.. It is our opinion that there is not. The DOE and its predecessor agency has tried and failed multiple times, over several decades. State veto power over siting a storage facility makes approval of a facility essentially a national referendum on nuclear power, given that a veto must be overridden by the Senate and the House. Also, the extremely long period of time required to develop any storage facility would certainly span presidential administrations of both political parties, making any project like Yucca Mountain susceptible to closure when the political winds change. Why would we expect a different result at a new site a decade hence?

History can be a stern teacher, and we should learn this important lesson. There is no long-term, politically expedient road to a Yucca Mountain–type facility anywhere in the U.S. We expect the blue ribbon commission to spend the next two years or more studying the problem only to come to the same conclusion. Nuclear fuel reprocessing has only received political lip service for decades. If there isn’t the political will to complete Yucca Mountain, building a reprocessing plant in the U.S. is beyond comprehension.

As a nation, we would be better served if Congress would amend the NWPA and NWPAA to delete the statutory responsibility of the DOE to store SNF, refund the NWF contributions, and quickly settle the 60-plus lawsuits pending to cover all current and future nuclear plant SNF storage costs. The elegant solution is to prime the nuclear fuel reprocessing pump by reprogramming NWF money into building such a facility without using public money. This approach also will minimize the size of a Yucca Mountain-like repository and thus improve the chances of actually siting and building a waste fuel repository.

Portions of this post were first published in POWER magazine and co-authored with Contributing Editor James Hylko.

Ratepayers Pay to (Not) Play

1. View of the above-ground support structures and north and south portals at the now-defunct Yucca Mountain repository. Source: Department of Energy/Office of Civilian Radioactive Waste Management (DOE/OCRWM)

The nuclear industry is unique among energy producers in its contractual commitment to cover the full costs for managing its waste. The Nuclear Waste Policy Act (NWPA) of 1982 directed utilities to levy fees on electricity generated by nuclear power and to pay those fees into a federal Nuclear Waste Fund (NWF) that was to be used to develop and operate a national repository. In return for the payment of fees, the NWPA directed the federal government to accept ownership and begin disposing of the spent nuclear fuel (SNF) and other high-level waste (HLW) no later than January 31, 1998. Those fees included the cost of transporting SNF to the repository.

Since 1983, consumers of electricity from nuclear power plants have paid approximately $32 billion into the NWF. Consumers in Alabama and Georgia, for example, have sent more than $1 billion to the NWF and continue to contribute over $44 million a year. The current balance in the NWF exceeds approximately $22 billion, and consumers nationwide are contributing about an additional $750 million a year. The difference between total collections and the current balance is roughly equal to the approximately $9 billion already spent on preparing the Yucca Mountain site to date.

The key unanswered question: Is the federal government responsible to reimburse ratepayers for the cancellation of Yucca Mountain? The U.S. Senate Committee on Environmental and Public Works weighed in on this issue in 2008 and prepared an estimate of the potentially huge long-term liabilities. The committee estimated additional liabilities of $7 billion by 2017 and $11 billion by 2020 should Yucca Mountain be cancelled.

The committee’s estimates seem to be in the ballpark, given the torrent of federal lawsuits that have been filed by utilities. First up was the suit filed by Energy Northwest in 2006. The U.S. Court of Federal Claims ruled on March 5, 2010, that the DOE owes Energy Northwest nearly $57 million in damages for breach of contract involving the former repository. The amount awarded offsets costs incurred by Energy Northwest to construct a used fuel storage area at its Columbia Generating Station Unit 2, located in Hanford, Washington. The court found the breach of contract was the failure of the DOE to begin accepting SNF from nuclear power plants in 1998 when Yucca Mountain was to be in operation per the DOE’s “Standard Contract” with nuclear power plants.

The Energy Northwest suit is the first of more than 60 similar suits filed by nuclear utilities. If each nuclear plant in the U.S. received the same award as Energy Northwest did for Columbia, then almost $6 billion would be owed to those utilities to cover future costs of storage and processing.

If Not at Yucca, Then Where?

If the desolate Yucca Mountain location (on federal land) is unacceptable, can there possibly be another politically acceptable location for such a repository in the lower 48 states? Probably not. However, the second paragraph of the DOE press release describes the next steps in the process that the DOE has been directed to take: “President Obama is fully committed to ensuring that the Nation meets our long-term storage obligations for nuclear waste,” said DOE General Counsel Scott Blake Harris. “In light of the decision not to proceed with the Yucca Mountain nuclear waste repository, the President directed Secretary Chu to establish the Blue Ribbon Commission on America’s Nuclear Future to conduct a comprehensive review of policies for managing the back end of the nuclear fuel cycle and to provide recommendations for developing a safe, long-term solution to managing the Nation’s used nuclear fuel and nuclear waste.”

If we are enlightened by history, this committee will be unable to identify a politically acceptable site within the two years given to produce a final report. We believe that, absent suitable representation from the utility industry — Exelon’s John Rowe is the only utility representative on the 15-member commission composed mainly of former politicians and political appointees, five university professors, and several think tank associates — the process will be troubled from the start. The commission is being co-chaired by former Congressman Lee Hamilton, who represented Indiana’s 9th congressional district from 1965 to 1999 and served on the 9/11 Commission, and Brent Scowcroft, who served as the national security advisor to Presidents Gerald Ford and George H.W. Bush.

Once the interim report is released in 18 months (and rest assured the candidate locations will be leaked early and often), the extreme political pressure on Chu will surely delay the final report.

This commission’s report is reminiscent of the Energy Policy Act of 2005 and its provisions for identifying “Corridors of National Interest.” In that case, the DOE prepared an interim report for the Federal Energy Regulatory Commission (FERC) listing perhaps a dozen regions where FERC should take action to enforce construction of interstate transmission lines when they were blocked by individual states. Within weeks, political fallout caused the draft report to be removed from the DOE website. When the DOE report was finally issued many months later, only two regions were listed. Moreover, absolutely no further progress has been made over the past two years.

Why should we expect faster progress by the DOE on a much more contentious issue than power lines? In addition, the time given to committee members to complete their work is out of balance with that of past studies. Also, witness the fine hand of Nevada Senator Harry Reid. Withdrawing the Yucca Mountain Nuclear Regulatory Commission (NRC) application “with prejudice” eliminates that site from further consideration by the Blue Ribbon Commission.

Underlying motives are always unclear when blue ribbon commissions are appointed. Yes, the political landscape has changed since a similar location survey was completed about 20 years ago — that one identifying Yucca Mountain by name in legislation as the nation’s SNF repository. Nevertheless, appointing this blue ribbon commission and apparently pushing for a new long-term SNF repository was an excellent strategic move for the administration. If the federal government does not continue its quest for a long-term repository for SNF, then ratepayers are due a $33 billion refund from the NWF (plus interest, we would assume, since 1983). Furthermore, each of the nuclear utilities will sue for the cost of providing individual long-term on-site storage of SNF, transportation, and other costs, if they haven’t already.

We believe the total liability of the federal government could quickly surpass $50 billion plus operating costs of the many facilities in perpetuity should a Yucca Mountain replacement not be found. Pursuing a new repository appears to push into the future these NWF repayments and reimbursements caused by DOE’s contract breach with each nuclear plant owner.

In Part V, we look at the spotty history of nuclear fuel reprocessing in the U.S. and how the U.S. has fallen decades behind other countries in reprocessing infrastructure.

Portions of this post were first published in POWER magazine and co-authored with Contributing Editor James Hylko.

This post looks at the legislative history of the ill-fated Yucca Mountain repository and the formation of a committee to explore alternative storage sites (again). In Part IV, we will look at some of the legal and political repercussions of Yucca Mountain’s failure.  Finally, in Part V, we explore failed attempts to reprocess nuclear fuel in the U.S. and examine the global state-of-the-art reprocessing plants now operating or under construction.

The Retrievable Surface Storage Facility

The AEC announced plans (circa May/June 1972) to construct an engineered, at-grade Retrievable Surface Storage Facility (RSSF) to be used until a permanent geological repository would be available. The plan was to locate the RSSF at an AEC or federal site in the western U.S. However, the environmental impact statement (EIS) issued by the AEC in support of the RSSF concept drew intense criticism from the public and the Environmental Protection Agency (EPA). Both criticized the plan because of the possibility that economic factors could later dictate using the facility as a permanent repository, contrary to the planned interim use of the RSSF. In this instance, it was unacceptable to proceed with an interim storage system unless there were unambiguous assurances that a permanent repository would be developed.

In 1975, Dr. Robert Seamans—in one of his first acts as administrator of the Energy Research and Development Administration (ERDA)—withdrew the EIS associated with the RSSF and decided that a permanent waste repository should be given budget priority. ERDA was created to assume the responsibilities of the then-dissolved AEC that were not covered by the newly formed NRC.

In 1976 a multiple-site strategy was initiated that would have led to the development of several repositories by 2000. Letters were sent to 36 state governors, informing them of these plans and asking for their cooperation in site exploration activities. A number of generic studies were undertaken at the Nevada Test Site, the Permian Basin and Palo Duro sub-basin in Texas, and Salina Basin in Michigan, Ohio, and New York. Exploration of specific sites would begin in Texas, Louisiana, Mississippi, Washington, and Nevada for the site that would host the first commercial waste repository.

As a group, these states realized the importance of becoming more intimately involved in the nuclear waste management decision-making process. ERDA offered to work closely with the states and to keep the governors informed of how its programs were progressing. It also promised to terminate a project within a state if technical issues were not resolved through mutually accepted procedures. The states, in effect, were being offered what they believed to be veto power over construction of a waste facility within their jurisdiction. Thus, what began as a new initiative to involve states in participative decision-making soon devolved into individual states halting projects because they were reluctant to consider a facility in their state.

The AFR Storage Concept

Because of the geologic disposal program’s relatively late start and the federal government’s deferral of commercial reprocessing, concerns were raised that a number of operating reactors would run out of room to store their spent nuclear fuel (SNF) on-site. Should that occur, and if there were no alternative locations for storing the SNF, the reactor would be forced to shut down. To address this particular concern, and while ERDA was reorganized into the current DOE, in 1977, ERDA pursued an “away-from-reactor (AFR) storage” concept for any spent fuel that utilities wished to transfer to the federal government. The government would then take title to the fuel and be responsible for its permanent disposal. At the time of transfer, the utilities would pay a one-time charge that would fully pay for storage and disposal costs.

The AFR concept was initially designed to serve four different functions: preventing the shutdown of reactors pending repository development; providing time for the geologic disposal program to mature; allowing the U.S. to accept limited amounts of foreign spent fuel to achieve nonproliferation objectives; and maintaining access to plutonium and uranium in the SNF should reprocessing become viable again in the future. However, the AFR concept was viewed very much as the RSSF concept had been several years earlier. The result was also similar: The project was terminated in 1981.

Nuclear Waste Policy Act

In 1982, Congress enacted the Nuclear Waste Policy Act, which was signed by President Ronald Reagan on January 7, 1983. The NWPA represented the most expensive civil works project in history, establishing a schedule for the DOE to site and for the NRC to license geological repositories for permanent disposal of SNF and high level nuclear waste (HLW). The DOE was directed to assess numerous locations around the country for possible sites and present a minimum of three finalist sites. Although this legislation was a decisive step forward, its attempted implementation again raised a public outcry based on accusations that government agencies were acting in secret to identify storage sites.

To finance the project, the NWPA established the NWF, to which electricity consumers would pay a fee of one-tenth of a cent for every nuclear-generated kilowatt-hour of electricity consumed. The DOE would draw upon the NWF to finance the siting, construction, and operation of repositories. In exchange for payment into the NWF, the DOE was required to take title to the SNF and HLW following the opening of the first repository — scheduled for January 31, 1998.

In February 1983, the DOE carried out the first requirement of the NWPA by formally identifying nine potentially acceptable locations (the host rock is shown in parentheses), for the first repository:

· Vacherie dome, Louisiana (domal salt)

· Cypress Creek dome, Mississippi (domal salt)

· Richton dome, Mississippi (domal salt)

· Yucca Mountain, Nevada (welded tuff)

· Deaf Smith County, Texas (bedded salt)

· Swisher County, Texas (bedded salt)

· Davis Canyon, Utah (bedded salt)

· Lavender Canyon, Utah (bedded salt)

· Hanford Site, Washington (basalt flows)

By 1984, the DOE believed that one or more repositories would be available by 2007 – 2009 and that sufficient repository capacity would be available 30 years beyond the expiration of any reactor operating license to dispose of SNF and HLW generated during that time. In addition, the DOE reaffirmed its obligation to accept SNF assemblies beginning in January 1998, whether or not a permanent disposal facility was ready. This announcement was to enable utilities to plan for their projected waste disposal needs with confidence and certainty.

After evaluating the nine candidate sites, the DOE selected three finalists: Yucca Mountain, Deaf Smith County, and Hanford. These sites advanced into the next round of intensive scientific study described as the “site characterization process.” Critics had claimed the sites were recycled from surveys performed in the 1970s and that the NWPA required the DOE to conduct a new screening process rather than proceed with sites considered prior to the passage of the NWPA. On May 28, 1986, President Ronald Reagan approved Yucca Mountain for site characterization under the NWPA. By that time, nearly $1.5 billion had been spent surveying, drilling, recording seismic information, monitoring, and analyzing the Yucca Mountain site.

Nuclear Waste Policy Amendments Act

President George H.W. Bush signed the NWPAA on December 22, 1987, which supposedly “settled” the waste storage issue by codifying the Yucca Mountain site in Nevada as the nation’s first geological waste nuclear fuel repository. Characterization of each site had been estimated to take five to seven years, costing somewhere around $1 billion to $2 billion, so work on the other two finalist sites was postponed indefinitely.

The NWPAA outlined a detailed approach for disposal involving review by the president, Congress, state and tribal governments, the NRC, and other federal agencies, while retaining the 70,000 metric ton limit on the amount of SNF and HLW that the DOE could place in the first repository. According to the amendment’s legislative history, the intent of this limitation was to ensure that no state would have to bear the entire nuclear waste disposal burden. The DOE also extended the timetable for opening the first repository from 1998 to 2003. However, if Yucca Mountain was found to be unsuitable, Congress was to be notified and provided alternatives.

Regional Equity Concerns

Regional equity concerns were raised because a majority of the SNF was being generated in the eastern U.S. while all of the final repository candidate sites were located in the west. At one time, however, there were 12 potential sites for a second repository in seven eastern states.

To counter the regional equity issue, a monitored retrievable storage (MRS) facility would be integrated into the ultimate disposal system and preferably be located in the eastern U.S. Also, the licensing process would be straightforward because the MRS did not have to isolate wastes for thousands of years but simply serve as a temporary, multi-decade storage facility; then shipments would be consolidated in dedicated trains and trucks taking waste to the repository.

Three sites had been identified in Tennessee, with the preferred site being Oak Ridge, which was originally identified for the postponed Clinch River breeder reactor in 1983 when funding was terminated. The State of Tennessee was against designating Tennessee alone as a contender and sued. The proposal was held up and ultimately went to the Supreme Court. The DOE won the case and submitted its proposal to Congress.

Nevertheless, in order to prevent the MRS from becoming a de facto repository — similar to the RSSF and AFR facility — the DOE recommended certain conditions linking MRS development to repository development. The license for the MRS would contain conditions allowing construction and operation of the MRS only when repository construction and operation was proceeding and would limit the total capacity of the MRS to 15,000 metric tons of waste.

The NWPAA had also established the Office of the Nuclear Waste Negotiator to negotiate agreements with states or Indian tribes willing to host a repository or an MRS. Such an agreement could contain different conditions than those imposed on a DOE-sited facility. However, the office was not reauthorized by Congress and was eliminated in 1995.

The Yucca Mountain Saga

Between 1987 and 2001, the DOE would spend another $3.8 billion on scientific and technical studies of Yucca Mountain. For instance, in 1997, a 5-mile tunnel through Yucca Mountain was completed to function as an Exploratory Study Facility. In 1998, a second 2-mile cross drift tunnel would facilitate additional experiments in the potential repository host rock. These tunnels, and the numerous niches and alcoves, created the world’s largest underground laboratory (Figures 1 and 2).

1. View of the South Portal of the Exploratory Studies Facility showing the 25-foot-diameter tunnel boring machine. Source: DOE/OCRWM

2. Tunnel boring machine cutter head at the South Portal in April 1997. Source: DOE/OCRWM

From the surface, more than 180 boreholes were drilled deep into the geology and its surrounding features. Independent scientists working for Nye County, Nevada, drilled additional exploratory holes and collaborated with DOE scientists on their findings. These efforts were further supplemented by numerous laboratory experiments and excavation of similar geologic features both nearby and at sites around the world. The results ultimately provided an understanding of the Yucca Mountain geology and its ability to safely contain radioactive wastes.

In 2001, the DOE issued reports containing thousands of pages of information, summarizing the extensive site characterization effort. Over the next year, the department would hold more than 65 public hearings, sending 6,000 letters to individuals, corporations, and groups, eventually responding to more than 17,000 comments. In 2002, President George W. Bush approved the secretary of energy’s recommendation of Yucca Mountain as the site for a nuclear fuel repository.

In April 2002, Governor Kenny Guinn (R) of the State of Nevada, as provided for by the NWPA, vetoed this decision. In the NWPA’s unprecedented procedure for ensuring that any site decision received thorough and fair consideration, the governor’s veto could only be overridden by a majority vote in both houses of Congress. For three months, Yucca Mountain was debated in Congress, in committee hearings, and on the floor of the House and Senate. Eventually, Congress would vote to override the objection by approving the Yucca Mountain site 306-117. Later, the Senate would approve the Yucca Mountain site by voice vote following a procedural “motion to proceed” vote, 60-39. This approval, known as the Yucca Mountain Development Act (YMDA), was signed into law by the president on July 23, 2002, allowing the DOE to prepare and submit a license application to the NRC.

By the time the YMDA was enacted, the DOE had spent $7.1 billion on the evaluation of multiple sites, detailed study of Yucca Mountain, the preparation and defense of the site recommendation, and related waste acceptance and transportation planning activities. It would spend another $1.5 billion preparing the Yucca Mountain license application, including transportation and waste acceptance plans. After years of delay, the DOE submitted the 8,600-page license application to the NRC in June 2008 (Figure 3).

3.    The Yucca Mountain license application. Source: DOE/OCRWM

After a preliminary 90-day screening period, the NRC determined that the application contained sufficient information to formally docket the application and move on to the next stage of technical and scientific review. Approximately 40 NRC staff members and consultants reviewed the license application prior to the docketing decision. The license application was not reviewed for merit during this screening period, but rather to determine whether it was complete enough for the NRC to proceed.

According to federal legislation, the NRC must complete the Yucca Mountain license application review within four years. However, there is no penalty if the NRC fails to finish the review within the required time period. According to the DOE, the earliest the repository could start accepting waste, given a smooth licensing process and consistent funding, was 2020. The total system life-cycle cost that includes the cost to research, construct, and operate Yucca Mountain for 150 years, from the beginning of the program in 1983 through closure and decommissioning in 2133, was estimated to exceed $96 billion.

The Only Option Remaining: On-Site Storage

Today, the only available solution for utilities is to store SNF on-site in water pools or in long-term above-ground storage casks. The volume of the water pools within each reactor limits the number of fuel assemblies it can hold at one time. Conceptually, the number of dry casks that can be used to store SNF is unlimited.

The water-pool storage option involves storing SNF assemblies under at least 20 feet of water to provide shielding from the radiation and removal of decay heat (Figure 4). About one-fourth to one-third of the total fuel load is removed from the reactor, typically every 18 months, and replaced with fresh SNF. You may recall that early in the development of commercial nuclear reactors, the government was expecting to construct a nuclear fuel reprocessing plant and the pools were sized to hold and cool SNF until it could be transported to the reprocessing facility. On April 7, 1977, President Jimmy Carter banned the reprocessing of commercial reactor fuel in the U.S. Since then, many of the nuclear plant spent fuel pools have either reached or are nearing capacity (Figure 5).

4. Storing spent fuel assemblies underwater in a storage pool. Source: DOE

5. This chart shows the cumulative number of filled pools at nuclear power plants. All operating nuclear power reactors are storing used fuel under NRC licenses in spent fuel pools. Some operating reactors are using dry cask storage. Source: NRC

Current regulations permit re-racking of the storage pool grid and fuel rod consolidation, subject to NRC review and approval, to increase the amount of SNF that can be stored in a pool. However, both of these methods are constrained by the size of the pool.

In the early 1980s, utilities began looking at using dry casks to increase on-site storage capacity. The process of loading a cask, consisting of a steel cylinder designed to hold typically two dozen SNF assemblies, takes place underwater in the storage pool. Once the assemblies have cooled for given period of time, they are transferred underwater from the storage racks to the submerged cask. Next, the cask is removed from the storage pool, where excess water is removed. Then it is backfilled with an inert gas to enhance decay-heat transfer capabilities, welded or bolted closed, inserted into a concrete overstructure (depending on design), and stored vertically on a concrete pad. The cask itself provides the necessary radiation shielding. Other above-ground designs seal the SNF inside a steel cylinder, which is then inserted either vertically into a concrete silo or horizontally into a concrete vault. The concrete provides the radiation shielding (Figure 6).

6. Spent nuclear fuel storage canisters are designed to be placed either vertically in aboveground concrete or steel structures, or stored horizontally in aboveground concrete vaults. Courtesy: NRC

The NRC approves dry-storage systems by evaluating each design for resistance to accident conditions such as floods, earthquakes, tornado missiles, and temperature extremes. Some cask designs can be used for both storage and transportation. The dry-storage casks are located in an independent spent fuel storage installation (ISFSI). Such storage may be either at the reactor site or elsewhere.

Site-Specific and General Licenses

The NRC authorizes storage of SNF at an ISFSI under two licensing options: site-specific licensing and general licensing. Under a site-specific license, an applicant submits a license application to the NRC, and a technical review is performed on the safety aspects of the proposed ISFSI. If the application is approved, the NRC issues a license that is valid for 20 years. The license contains technical requirements and operating conditions (including fuel specifications, cask leak testing, surveillance, and other requirements) for the ISFSI and specifies what the licensee is authorized to store at the site.

A general license authorizes a nuclear plant licensee to store SNF in NRC-approved casks at a site that is licensed to operate a power reactor under 10 CFR Part 50. Licensees are required to demonstrate that their site is adequate for storing SNF in dry casks. The licensee must also make any necessary changes to its security program, emergency plan, quality assurance program, training program, and radiation protection program to incorporate the ISFSI at its location. In addition, these evaluations must show that the cask’s technical specifications covered in the Certificate of Compliance (CoC) can be met, including analysis of earthquake intensity and tornado missiles (objects accelerated by very high winds). The NRC issues a CoC to the vendor following a technical review and approval of a dry storage system’s design in accordance with 10 CFR 72. The certificate expires 20 years from the date of issuance and can be renewed in additional 20-year increments.

The first U.S. commercial ISFSI was licensed by the NRC in 1986 at the Surry Nuclear Plant in Virginia. Since then, dry cask storage has become common among licensees needing additional SNF storage capacity. According to the NRC, SNF is currently in dry storage at 40 general license ISFSIs and 15 site-specific license ISFSIs. For example, Southern Nuclear’s Hatch and Farley nuclear plants safely store spent fuel in above-ground dry storage casks (Figure 7).

7. Southern Nuclear’s dry-cask storage system at Hatch Nuclear Plant. Courtesy: Southern Nuclear

Southern Nuclear is the operator of the Vogtle nuclear plant. At Vogtle, all of the used fuel for both units is stored safely under water in two storage pools located in the protected area of the plant. There is still storage capacity available in the existing pools to last for years. Therefore, by combing the existing capability of the storage pools and dry-storage facilities when the spent fuel pool does reach capacity, all of Southern Nuclear’s sites have the capability to safely store spent fuel on-site for the duration of each plant’s operating license.

Part IV will review the legal and political impact of the Yucca Mountain failure.

Portions of this post were first published in POWER magazine and co-authored with Contributing Editor James Hylko.

Project Salt Vault

The primary objective of Project Salt Vault was to demonstrate the safety and feasibility of handling and storing high level nuclear waste (HLW) solids from power reactors in salt formations. The engineering and scientific objectives were to:

· Demonstrate waste-handling equipment and techniques required to handle packages containing HLW solids from the point of production to the disposal location.

· Determine the stability of salt formations under the combined effects of heat and radiation (approximately 4,000,000 curies of radioactive material, yielding up to 109 rads).

· Collect information on creep and plastic flow of salt needed for the design of an actual disposal facility.

· Monitor the site for radiolytic chemical reactions, if such should occur.

The demonstration site selected was the inactive Lyons, Kansas mine of the Carey Salt Co. The 1,020-foot deep salt mine had operated from 1890 to 1948 and had been kept open for possible future use. Preparations for the demonstration began in 1963, and the first radioactive material was placed in the mine in November 1965. The tests involved the emplacement of actual irradiated fuel assemblies from the Engineering Test Reactor (ETR) in Idaho. The ETR assemblies were chosen because of their availability on a dependable schedule and their relatively high radioactivity levels.

Seven sealed canisters containing 14 spent nuclear fuel (SNF) assemblies were transported by truck in a lead-shielded carrier to the site. The canisters were lowered into the mine one at a time through a 19-inch-diameter charging shaft. In the mine, the canisters entered a lead-shielded vessel on a trailer pulled by a diesel-powered tractor called the “waste transporter.” The hauler delivered the canisters, one at a time, to an array of lined holes drilled in the floor. The waste transporter was also used to recover and transfer the canisters at the end of the tests.

The canisters were placed in a ring-like arrangement in the floor of the mine (Figure 1). Electrical heaters — used to compensate for lower heat release rates of the fuel elements compared with actual waste — were attached to the lower liners to raise temperatures in the central pillar in order to obtain information on its in-situ structural response to heat.

1. In-situ testing of nuclear wastes was conducted in the mid-1960s at the Carey salt mine. Source: Kansas Geological Survey

The program plan called for replacing the waste every six months to maximize the radiation dose to the surrounding salt formations. At the end of each phase, the spent fuel was retrieved and returned to Idaho.

The results showed that the structural properties of salt were not significantly altered by the high radiation levels. Useful information was gathered with respect to thermal stresses, migration of brine-filled cavities, and salt-flow characteristics as a function of temperature. For example, the demonstration revealed that inclusions of moisture, or brine, in the salt beds had a tendency to migrate up a thermal gradient toward a heat source placed in the salt. Quantities of brine were measured as migrating and interacting with the deposited waste canisters.

All the predictions of thermal and radiation effects based upon theoretical modeling and laboratory experiments were confirmed by the in-situ demonstration. Despite the rather high radiation levels and high thermal loading, no measurable radiolytic or excessive structural effects in the salt were observed. In addition, operations at Lyons, both at the surface and in the mine, were carried out without the use of hot cells (shielded nuclear radiation containment chambers used to protect workers). Maximum personnel recorded dose during any quarter was 200 mrem, principally to the hands of a worker.

The results of the Project Salt Vault demonstration led many in the AEC to believe that the use of bedded salt was satisfactory for the disposal of radioactive wastes. The experimental phase of Project Salt Vault was terminated in June 1967 when the last canister was removed from the mine. The Lyons Mine was then placed on standby on February 1, 1968.

The Beginning of the End

Workers from Project Salt Vault recall that it enjoyed the support of the local community. Four factors contributed to this climate of acceptance:

· The experiment was designed from the beginning to be reversible; that is, once it was completed, all the waste would be completely removed.

· Consultations were held with local groups before the project began.

· Efforts were made by Oak Ridge National Laboratory personnel to conduct the studies in full view of Kansans.

· Once the research started, regular tours were conducted in which the general public could visit the mine.

However, two intervening events forced the AEC to withdraw from the Lyons site. The first was a fire in 1969 at the Rocky Flats facility in Colorado, which produced pits for nuclear weapons. The accident generated a large volume of low-level, plutonium-contaminated debris. Following standard operating procedures, the managers of Rocky Flats sent the waste to the National Reactor Test Station in Idaho for storage. That action outraged Idaho’s political leadership, which saw no reason why their state should become the “dumping ground” for waste created in Colorado. They acted and ultimately extracted a commitment from AEC Chairman Glenn Seaborg (1961 – 1971) that all of the waste would be removed from Idaho by 1980. That pledge necessitated the construction of a disposal facility. The second factor, dominating an entire decade, was the growing opposition to nuclear power punctuated by the Three Mile Island accident in 1979.

Confronted with the immediate need for a repository, and given the available information at the time, the AEC’s siting strategy was to quickly identify a site for storage of nuclear wastes in a salt dome underlying about 500,000 square miles in portions of 24 states. Most importantly, bedded salt deposits were completely free of circulating groundwater and were isolated from underground aquifers by impermeable shale. Any fractures that might develop would be sealed by plastic deformation and recrystallization of the salt. The regions considered cut down the site options because only salt deposits 200 feet thick and lying within 2,000 feet of the surface were deemed suitable for the first waste repository. The largest areas meeting these criteria lay in central Kansas, although there were two smaller areas in Michigan and one in west central New York. In 1970, the AEC announced that, pending confirmatory tests, the Lyons site was being selected as the first full-scale national repository.

The degree to which the AEC had consulted with state and local officials before this announcement is in dispute. What is clear is the AEC’s decision did not receive the same ringing endorsement as the earlier experimental tests had. Moreover, state and local political opposition to the Lyons site was intense, particularly when technical problems with the site became apparent. The political arm-twisting had just begun.

Political Opposition Begins

A widely held view among leaders of the Kansas Geological Survey was that there was insufficient knowledge about repository design, the heat-flow models were primitive, and there were large gaps in the understanding of waste-rock interactions and rock mechanics. These concerns, among others, were the basis for opposition from U.S. Representative Joe Skubitz, who represented a Kansas district that did not include Lyons, and Governor Robert Docking. What followed was a barrage of criticism, and, despite the agency’s best efforts, protests asserting that the AEC was tramping on state interests took hold in the public mind.

As an example of the political discourse at the time, Skubitz inquired why the Kansas salt fields were selected instead of a site in the Salina Basin, which would have been closer to the operating and planned reprocessing plants in New York, Illinois, and South Carolina. The agency responded by saying the Kansas site possessed geologic characteristics more favorable than those of the salt in the Salina Basin. The AEC furthermore justified the long transport routes to Kansas by suggesting a reprocessing plant would be built in California, thus making the Lyons site centrally located. In retrospect, the AEC was tone deaf when responding to the nontechnical factors, relying on its highly technical justifications for the Lyons site. Furthermore, it is believed that the Kansas salt mine was chosen because of prior local acceptance of Project Salt Vault and because the AEC did not have the resources to investigate other locations, nor did it wish to spend two years studying other sites.

By August 1971, the controversy escalated to the level of involving both Kansas senators, Robert Dole and James Pearson, who sponsored an amendment to the AEC’s authorizing legislation. The amendment prohibited buying land or burying waste materials at Lyons until such time as an independent advisory council, appointed by the president, reported to Congress that the establishment of a repository and burial of waste could be carried out safely. Thus, the AEC’s inability to satisfy concerns of state officials resulted in its losing considerable autonomy in implementing a major policy.

In September 1971, newly discovered technical difficulties would severely threaten the project’s future. Roughly, 20 oil and gas boreholes in the area were found to be impossible to plug, and the unexpected disappearance of water from a nearby solution mining operation raised many questions about the geologic integrity of the salt domes for storing liquid nuclear waste. In February 1972, the AEC withdrew from further operations at the Lyons site, citing technical uncertainties and problems with political and public acceptance.

In the 1980s, Kansas refused to issue a permit for low-level nuclear waste to a new contractor. The shaft was permanently sealed in December 1994. (Though this article does not concern waste from the DOE defense program, it should be noted that transuranic radioactive waste from that program (and from nuclear power generation) has been transported to and stored at the Waste Isolation Pilot Plant near Carlsbad, N.M., since March 1999. That geological repository is in the Permian Salt Basin.)

In Part III we look at the rise and fall of Yucca Mountain and the how dry-cask storage is now used to store spent nuclear fuel.

Portions of this post were first published in POWER magazine and co-authored with Contributing Editor James Hylko.

The Nuclear Waste Policy Act of 1982 and Amendments of 1987 established a national policy and schedule for developing geologic repositories for the disposal of SNF and HLW. Those deadlines have come and gone; the cancellation of Yucca Mountain was only the latest failed attempt to make this policy a reality.

Nuclear fuel reprocessing traces its roots to work started in 1943 but the development work was suspended in the mid-1970s after several failed projects. The task of finding a new long-term storage location has now been assigned to yet another committee and SNF reprocessing remains in limbo in the U.S. while other nations are building modern reprocessing facilities.

Are developing a coherent nuclear fuel policy and following through on the plan impossible tasks?

In Part I of this series, we examine the historical context of the U.S. nuclear waste storage policy. In Parts II and III, we will look at the history of the ill-fated Salt Vault and Yucca Mountain projects.  Part IV will look at the legal and political fallout from the Yucca Mountain failure, and Part V will explore failed attempts to reprocess nuclear fuel in the U.S. and examine the global state-of-the-art reprocessing plants now operating or under construction.

The U.S. Department of Energy’s (DOE’s) two-paragraph March 3 press release describing its motion to withdraw its pending license application for Yucca Mountain was an indecent obituary for the disposal site’s brief 23-year life and $8 billion cost. The relatively short history of nuclear power in the U.S. reminds us that the Yucca Mountain project may have been doomed from the start. A number of permanent nuclear waste storage site projects have been cancelled over the past 45 years, although Yucca Mountain was exponentially the most expensive failure. History also tells us that political considerations will always trump technology when it comes to siting a nuclear waste repository.

The DOE’s terse statement was expected given the funding death spiral for the project over the past few years and a new president who promised to close Yucca Mountain: “The U.S. Department of Energy today filed a motion with the Nuclear Regulatory Commission to withdraw the license application for a high-level nuclear waste repository at Yucca Mountain with prejudice.”

This decision again leaves the power generation industry without a long-term spent nuclear fuel (SNF) disposal site, despite the federal government’s legal obligation to provide one. The pivotal difference between Yucca Mountain and previously cancelled projects: This time nuclear utilities collected billions of dollars from ratepayers to pay for the project.

On Tuesday, June 29, a three-judge panel of the the NRC’s Atomic Safety and Licensing Board declared that the Secretary of Energy did not have authority to override the law that named Yucca Mountain the nation’s nuclear waste repository.  While this decision leaves the project with a faint pulse, it is likely that Nevada Senator Harry Reid and the Obama Administration will find a way to pull the plug.

The Birth and Slow Death of Yucca Mountain

Congress established a national policy for the disposition of commercial SNF and HLW with passage of the NWPA in 1982. When it was passed, the NWPA required the DOE to identify and evaluate two different sites to ensure regional equity for the permanent geologic disposal of SNF and HLW. Initially, nine sites were identified, and eventually three were short-listed. In 1987, Congress officially designated Yucca Mountain, located about 85 miles by air northwest of Las Vegas, Nevada. The selection of Yucca Mountain as the nation’s permanent nuclear waste repository was then codified with passage of Nuclear Waste Policy Act Amendment (NWPAA). The DOE expected to begin accepting nuclear waste in an operating geologic repository by 1998.

But official selection did not build a straight desert highway for the depository’s development to follow, as we detail below. Most recently, while Yucca Mountain remained on the books, progress was limited by extreme budget cuts over the past two years. The March 3 announcement was the equivalent of a death sentence. The final “time of death” pronouncement will come only when the administration asks Congress to update the NWPAA by removing the specific reference to Yucca Mountain.

Meanwhile, ongoing responsibilities under the NWPAA, such as administration of the NWF, continue under the Office of Nuclear Energy, which will continue to lead future waste management activities.

Should the blue ribbon commission and Congress ever come to a consensus on a new repository site, expect a revision to the NWPAA to replace Yucca Mountain with the new site in order to codify the decision. In the meantime, Yucca Mountain remains codified as our nation’s nuclear waste repository, although the designation is meaningless without funding and an approved license application from the NRC.

Origins of the U.S. Nuclear Waste Management Policy

Markets Schmarkets

One argument often heard is that market actions are not indicative of economic merit.  Rod Adams, for instance, writes: 

Markets dominated by people whose only motive is making more money are not the best decision makers – the people making the decisions in that situation will often decide to influence the law of supply and demand by keeping their hands on the levers that they can use to keep supply restrained. If their hands are “invisible” it is because they work at keeping them hidden or because observers and academic study producers do not work very hard to find them. 

Well, the desire to make money is what makes markets work in the first place.  Rather than walk through an Econ 101 text to flesh out that point, let me ask a question: If profit-hungry investors aren’t the best people to make decisions about whether to invest in this or that, then who are – vote-maximizing politicians?  Who has the better incentive to make efficient investment decisions?

Rod seems to be suggesting that nuclear power prices are high because plant operators make more money that way.  Given that those operators have to compete with coal and gas-fired electricity, how exactly do cost overruns and high construction costs help nuclear power plant operators?    

Regardless, if you really believe that market actors maximize revenues by restraining supply to the detriment of consumers, then you should be in favor of a total government take-over of the energy industry.  Nothing else will solve that problem were it to exist.  But what makes us think that a government-run energy sector will perform any better than a government-run health care sector, a government-run agricultural sector, or what have you?  When politicians elbow aside market actors and call the shots, we get decisions that are designed to help politicians, not the economy.  See, for instance, the utterly insane ethanol preferences that make absolutely zero sense from an economic or environmental perspective but wonderful sense from a political perspective.

Jon Boone seconds Rod Adams’ contention that markets are worthless in this context:

As Adam Smith himself wrote, his unseen hand works effectively when the field is level and the players share a common sense of the rules, values, and objectives of the game. Such is not the case today in the energy marketplace.

That’s not quite what Adam Smith wrote, but never mind.  Jon’s indictment of the market could be made in every sector of the economy because there is no instance that I am aware of when all of these alleged preexisting conditions for effective market operation exist.

But we are not debating about the merits of a theoretically “flawed” market versus a perfect state command-and-control regime.  We are debating the merits of a real work economy versus a real-world U.S. Congress making energy decisions in place of investors.  That should be an easy debate to adjudicate for readers of this blog.  Alas, when the topic turns to nuclear power, it is not an easy debate to resolve because, for many, if the market is rejecting nuclear power, it means there’s something wrong with the market … not that there might be something wrong with nuclear power.

Ed Peschko states the case most bluntly:

You can do some quick, back-of-the-envelope calculations based on power densities and physical trends to get an idea of when the market is giving a false signal or a true one.

Alas, this is the reigning conceit of central planners everywhere: Smart guys with computers and specialized training can outperform markets and market actors and know more than the accumulated wisdom of millions of market actors who’s insights are aggregated in price information.  If this were true, then socialism would work grandly.  Alas, it does not and there is no BTU exception to the observations found in The Wealth of Nations.

Experience Abroad

Nuclear power advocates frequently point to experience abroad as proof that nuclear energy is economic under something closer to optimal political conditions.  Ted Rockwell, for instance, notes that plants in Europe make a profit, so why can’t they make a profit here as well? 

Yes, some nuclear power plants in Europe – and rather many in the United States for that matter – make a hell of a profit.  That’s the case in the U.S. because third-party investors bought those plants at fire-sale prices from utilities which had been bled dry by those same plants.  The new owners turned out to be much better operators than the old owners, and so profits were gained. 

So yes – if someone else eats the bulk of the construction costs, you can make money in nuclear.  That’s not very relevant going forward, however, for those interested in building new facilities.  The construction costs will be their’s to eat. 

European nuclear power plant construction costs going forward are not much different than U.S. construction costs as witnessed by the Areva debacle in Finland – the first new power plant to be built in a liberal energy market anywhere in the world over the past several decades.  This facility, for those not keeping up with the news, was advertised to be a state-of-the-art, modular facility with a $4.2 billion price tag - about the same as that for a similarly-sized plant that might be built in the U.S. - but it is already several years behind schedule and 50% over budget for reasons that have nothing to do with regulatory delay.  The final price tag is expected to double.  

Nuclear often gets built in non-liberal energy markets in Europe, however, because it is the state – not the market – that decides what gets built in those economies and politicians in France and elsewhere simply love nuclear power for all sorts of (non-economic) reasons.  Because these are public-private construction projects, it’s hard to concretely identify total costs.  But to the extent we can, they do not appear to be different than those experienced in the United States. 

In France, overnight construction costs for an Areva plant being built in Flamanville are estimated at 4 billion Euros, or 2,434 Euros/kW, which is just as high – if not higher! – than many costs estimates floating around for new plants in the United States.  That plant, by the way, is also running behind schedule and over budget – and this from one of the most experienced nuclear power companies currently operating anywhere in the world today.

Ed Peschko, on the other hand, finds inspiration in Asia:

In places where nuclear is accepted and where energy projects seem to be planned on technical merits – namely korea, china, taiwan and japan – construction costs are much lower. Large reactors are regularly being built there in a 3 to 5 year timeframe at 1500-2000 $/KW. 

That is simply incorrect.  For data on construction costs there, see Jim Harding, Economics of Nuclear Power and Proliferation Risks in a Carbon-Constrained World,” The Electricity Journal 20:10, December 2007.  Costs there are as high (or higher!) than costs here once relatively low-cost Korean labor is factored into the equation.

Blaming the Regulators

Jim Hopf, like many, believes that nuclear power was cheap before the regulatory onslaught that followed the Three Mile Island incident.  This, he says, is strong evidence that regulators are to blame for high construction costs. 

But nuclear power plant construction costs were climbing steeply well before Three Mile Island, almost doubling from the period 1972-1973 to the period 1974-1975 and increasing by 50% from the 1974-1975 period to the 1976-1978 period (see Table 12.3 in William Peirce’s excellent Economics of Energy Industries: 2^nd Edition, Praeger, 1996).  They doubled again after Three Mile Island and regulatory reaction was indeed one reason.  But there were other reasons as well; the general inflation of construction costs throughout the economy, high interest rates, and poor utility management. 

The latter should not be underestimated.  Some utilities were able to hold construction costs down rather impressively even in the wake of Three Mile Island.  Of the 24 plants that were ready to begin operations in the period between 1984-1987, costs ranged from $830 per MW of installed capacity (for Duke Power’s Maguire 2 facility) to $4,700 per MW for the infamous Shoreham plant (nominal dollars for both). 

Here we find perhaps the best argument for the possibility of economically competitive nuclear power; to wit, that low cost plants have indeed been built in the past.  This is true, but it seems to be an exception to the rule.  Good utility management can theoretically get low-cost plants into the market.  And if any good utility managers have a plan to do so, they have every chance of convincing profit-hungry investors that free money will come to those who provide the loans.

The larger point, however, is that if the industry could not survive the regulatory jihad after Three Mile Island, how do we explain the Maguire 2 plant?  Too often, we attribute high costs to regulators rather than poor utility management.

Katana0182 (whoever that may be – I prefer to deal with actual names) may be correct that the Nuclear Energy Institute is not ideally placed to challenge bad regulation.  I have heard similar arguments from friends in the nuclear energy industry (yes, believe it or not, I do indeed have friends in the industry!) who are frustrated with that association’s attitude towards Washington.  On the other hand, industry executives who testify in front of Congress sing nothing but praise for the existing federal regulatory architecture.  Do chief executives of other heavily-regulated industries do the same when they are encumbered by – or threatened to be encumbered by – counter-productive federal policy?  Uh … no.  Peruse through the testimony of the oil industry over the past decade if you want a dose of industry anger towards government.

That said, Katana’s contention that construction costs would be much lower if the feds didn’t prescribe how plants were to get built is founded upon a misunderstanding of the regulatory status quo.  Utilities submit designs and the NRC approves them or not.  Perhaps you think that the NRC does too much tinkering with these plans, but if so, we hear little complaint from those who would have every reason to complain – the parties filing the permit requests.

Even if regulations are “good” now, isn’t there fear that they will become “bad” in the future?  If so, might that – as Ted Rockwell argues – color investor interest in nuclear power?  Of course!  Regulatory uncertainty is no small thing.  But it is not, as Mr. Rockwell argues, a good argument for federal loan guarantees.  Those guarantees do not “ameliorate” this risk because the risk of policy change does not go away.  The risk is simply transferred from investors to taxpayers.  That’s a good deal for the industry, perhaps, but a bad deal for the taxpayers. 

Regardless, regulatory uncertainty exists for all sectors of the economy.  Ask the coal industry about it with regards to future rules concerning carbon emissions.  Should we give them loan guarantees as well?

Quibbles

Several commenters go into great detail about how micro plants and other technological innovations could make nuclear economic.  Rod Adams, for instance, asks:

What if some technologists reject that assumption [high construction costs – although the reality of high construction costs is not an “assumption”] and choose a path that aggressively and successfully works to reduce construction costs? 

Well then, I would throw a party.  Haven’t seen it yet though.

If technological innovations occur, those innovations will attract investor interest and, hence, find their way into the market.  That’s what a single-minded pursuit of profit will deliver to us in a free market economy. 

Rod Adams also complains about my statement that the argument for nuclear power is little different from the argument for solar power.  He’s right to point out that nuclear power has many advantages relative to solar power.  But that’s not the point.  The reason that solar power and nuclear power is the flip side of the same coin (economically and politically) is that neither would exist without massive amounts of government intervention.  The Nuclear Energy Institute admits this frankly when their production tax credits, loan guarantees, and liability protections are up for legislative renewal.  They are similar politically because the arguments made for both are in large part identical; they both offer theoretically limitless power, they both have low operating costs, they are both environmentally friendly (relatively speaking), they both capture the popular imagination, and advocates for both turn themselves into pretzels in the course of arguing that the object of their affection is economically competitive were it not for some vague conspiracy of competitors acting to keep those technologies down.

Jim Hopf goes into great detail about how prices are inaccurate because pollution from gas and coal is not reflected in electricity prices.  His argument as it pertains to carbon was already dealt with in my initial post, so I will not elaborate on that.  All I would add is that if we could quantify the negative externalities at issue and they were found to be significant, then the correct remedy isn’t subsidy to nuclear power (or solar power for that matter) but a Pigovian tax. 

Nonetheless, academics who have attempted to quantify these externalities have produced estimates that are all over the map (see Thomas Sundqvist and Patrik Soderholm, “Valuing the Environmental Impacts of Electricity Generation: A Critical Survey,” The Journal of Energy Literature 7:2, December 2002).  Hence, it’s unclear to what extent these externalities are worth our time. 

The national security externality Jim would like to see addressed was demolished two years ago in an article I wrote on this topic for The Georgetown Journal of Law and Public Policy.  See also this study by my colleague Richard Gordon.

Conclusion

I agree completely with Richard Fulmer.  The only way to know for certain whether an industry or a technology is economically worthwhile is to subject that industry or technology to a market test.  We have done this with nuclear and it has so far failed said test.  Excuses are rampant, of course, but if the main excuse has merit – that regulators are unduly burdening the industry – then the proper remedy is to reform said regulations, not to cut a taxpayer-backed check.

If one day the industry could pass that market test – without government assistance – then I would be as happy as any one of the commenters to my original post.  But rigging the market to get the passing grade is – and always will be – bad policy no matter what technology we’re talking about.

 My argument was the same that I have offered in print: Nuclear power is a swell technology but, given the high construction costs associated with building nuclear reactors, it’s a technology that cannot compete in free markets without a massive amount of government support.  If one believes in free markets, then one should look askance at such policies. 

As expected, the atomic cult has taken offense. 

Regulation to Blame?

Now, it is reasonable to argue that excessive regulatory oversight has driven up the cost of nuclear power and that a “better” regulatory regime would reduce costs.  Perhaps.  But I have yet to see any concrete accounting of exactly which regulations are “bad” along with associated price tags for the same.  If anyone out there in Internet-land has access to a good, credible accounting like that, please, send it my way.  But until I see something tangible, what we have here is assertion masquerading as fact.

Most of those who consider themselves “pro-nuke” are unaware of the fact that the current federal regulatory regime was thoroughly reformed in the late 1990s to comport with the industry’s model of what a “good” federal regulatory regime would look like.  As Oliver Kingsley Jr., the President of Exelon Nuclear, put it in Senate testimony back in 2001:

The current regulatory environment has become more stable, timely, and predictable, and is an important contributor to improved performance of nuclear plants in the United States.  This means that operators can focus more on achieving operational efficiencies and regulators can focus more on issues of safety significance.  It is important to note that safety is being maintained and, in fact enhanced, as these benefits of regulatory reform are being realized.  The Nuclear Regulatory Commission — and this Subcommittee — can claim a number of successes in their efforts to improve the nuclear regulatory environment.  These include successful implementation of the NRC Reactor Oversight Process, the timely extension of operating licenses at Calvert Cliffs and Oconee, the establishment of a one-step licensing process for advanced reactors, the streamlining of the license transfer process, and the increased efficiency in processing licensing actions.

It’s certainly possible that the industry left some desirable reforms undone, but it seems relevant to me that the Nuclear Energy Institute — the trade association for the nuclear energy industry and a fervent supporter of all these government assistance programs — does not complain that they’re being unfairly hammered by costly red-tape.

Natural Gas Bias?

For the most part, however, the push-back against the arguments I offered last week has little to do with the alleged regulatory problem. It has to do with bias.

According to a post by Rod Adams over at “Atomic Insights Blog,” I am guilty of ignoring subsidies doled out to nuclear’s biggest competitor — natural gas — and because Cato gets money from Koch Industries, it’s clear that my convenient neglect of that matter is part of a corporate-funded attack on nuclear power.  Indeed, Mr. Adams claims that he has unearthed a “smoking gun” with this observation.

Normally, I would ignore attacks like this.  This particular post, however, offers the proverbial “teachable moment” that should not be allowed to go to waste.

First, let’s look at the substance of the argument.  Did I “give natural gas a pass” as Mr. Adams contends?

Well, yes and no; the show was about the cost of nuclear power, not the cost of natural gas.  I did note that natural gas-fired electricity was more attractive in this economic environment than nuclear power, something that happens to be true.

Had John Stossel asked me about whether gas’ economic advantage was due to subsidy, I would have told him that I am against natural gas subsidies as well — a position I have staked-out time and time again in other venues (while there are plenty of examples, this piece I co-authored with Daniel Becker — then of the Sierra Club — for The Los Angeles Times represents my thinking on energy subsidies across the board.  A blog post a while back about the Democratic assault on oil and gas subsidies found me arguing that the D’s should actually go further!  Dozens of other similar arguments against fossil fuel subsidies can be found on my publications page).

So let’s dispose of Mr. Adams’ implicit suggestion that I am some sort of tool for the oil and gas industry, arguing against subsidies here but not against subsidies there.

Relative Subsidies: Natural Gas vs. Nuclear

Second, let’s consider the implicit assertion that Mr. Adams makes — that natural gas-fired electricity is more attractive than nuclear power primarily because of subsidy.  The most recent and thorough assessment of this matter comes from Prof. Gilbert Metcalf, an economist at Tufts University.  Prof. Metcalf agrees with a 2004 report from the Energy Information Administration which contended that preferences for natural gas production in the tax code do little to increase natural gas production and thus do little to make natural gas less expensive than it might otherwise be.

They are wealth transfers for sure, but they do not do much to change natural gas supply or demand curves and thus do not affect consumer prices.  Prof. Metcalf argues that if we had truly level regulatory playing field without any tax distortions, natural gas-fired electricity prices would actually go down, not up!  Government intervention in energy markets does indeed distort gas-fired electricity prices.  It makes them higher than they otherwise would be!

The Energy Information Administration (EIA) identified five natural gas subsidies in 2007 that were relevant to the electricity sector (table 5).  Only two are of particular consequence.  They are:

• Expensing of Exploration and Development Costs – Gas producers are allowed to expense exploration and development expenditures rather than capitalize and depreciate those costs over time.  Oil and gas producers (combined) took advantage of this tax break to the tune of $860 million per year.  How much goes to gas production rather than to oil production is unclear.
• Excess of Percentage over Cost Depletion Deferral – Under cost depletion, producers are allowed to make an annual deduction equal to the non-recovered cost of acquisition and development of the resource times the proportion of the resource removed that year.  Under percentage depletion, producers deduct a percentage of gross income from resource production.  Oil and gas producers (combined) take advantage of this tax break to the tune of $790 million per year.  How much goes to gas production rather than to oil production is unclear. 

Even if we put aside the fact that these subsidies don’t impact final consumer prices in any significant manner, it’s useful to keep in mind the fact that the subsidy per unit of gas-fired electricity production — as calculated by EIA — works out to 25 cents per megawatt hour (table 35).  Subsidy per unit of nuclear-fired electricity production works out to $1.59 per megawatt hour.  Hence, the argument that nuclear subsidies are relatively small in comparison with natural gas subsidies is simply incorrect.

Some would argue that the Foreign Tax Credit — a generally applicable credit available to corporations doing business overseas that allows firms to treat royalty payments to foreign governments as a tax that can be deducted from domestic corporate income taxes — should likewise be on the subsidy list. 

The Environmental Law Institute calculates that this credit saves the fossil fuel industry an additional $15.3 billion.  There is room for debate about the wisdom of that credit, but regardless, it doesn’t appear as if the Foreign Tax Credit affects domestic U.S. prices for gas-fired electricity.     

The bigger point is that without government help, few doubt that the natural gas industry would still be humming and electricity would still be produced in large quantities from gas-fired generators.  But without government production subsidies, without loan guarantees, and without liability protection via the Price-Anderson Act, even the nuclear power industry concedes that they would disappear.

Now, to be fair, Prof. Metcalf reports that nuclear power is cheaper than gas-fired power under both current law and under a no-subsidy, no-tax regime.  His calculations, however, were made at a time when natural gas prices were at near historic highs that were thought to be the new norm in energy markets and were governed by fairly optimistic assumptions about nuclear power plant construction costs.

Those assumptions have not held-up well with time.  For a more recent assessment, see my review of this issue in Reason along with this study from MIT, which warns that if more government help isn’t forthcoming, “nuclear power will diminish as a practical and timely option for deployment at a scale that would constitute a material contribution to climate change risk mitigation.”

Third, Mr. Adams argues that the federal nuclear loan guarantee program is a self-evidently good deal and implies that only an anti-industry agitprop specialist (like me) could possibly refuse to see that.  “That program, with its carefully designed and implemented due diligence requirements for project viability, should actually produce revenue for the government.”  Funny, but when private investors perform those due diligence exercises, they come to a very different conclusion … which is why we have a federal loan guarantee program in the first place. 

Who do you trust to watch over your money — investment bankers or Uncle Sam?  The former don’t have the best track record in the world these days, but note that the popular indictment of that crowd is that investment banks weren’t tight fisted enough when it came to lending.  If even these guys were saying no to nuclear power — and at a time when money was flowing free and easy — what makes Mr. Adams think that a bunch of politicians are right about the glorious promise of nuclear power, particularly given the “too cheap to meter” rhetoric we’ve heard from the political world now for the better part of five decades? 

Anyway, for what it’s worth, the Congressional Budget Office has taken a close look at this alleged bonanza for the taxpayer and judged the risk of default on these loan guarantees to be around 50 percent.  They may be wrong of course, but the risks are there, something Moody’s acknowledged last year in a published analysis warning that they were likely to downgrade the credit-worthiness of nuclear power plant construction loans.

Climate Alarmism and Nuclearism

Fourth and finally, Mr. Adams cites Cato’s skepticism about “end-is-near” climate alarmism as yet more evidence that we are on the take from the fossil fuels industry. 

I don’t know if Mr. Adams has been following current events lately, but I would think that we’re looking pretty good right now on that front.  Der Spiegel — no hot-bed of “Big Oil” agitprop — sums up the state of the debate rather nicely in the wake of the ongoing collapse of IPCC credibility.  Matt Ridley — another former devotee of climate alarmism — likewise sifts through the rubble that is now the infamous Michael Mann “hockey stick” analysis (which allegedly demonstrated an unprecedented degree of warming in the 20th Century) and finds thorough and total rot at the heart of the alarmist argument.

Mr. Adams is perhaps unaware that our own Pat Michaels has been making these arguments for years and Cato has no apologies to make on that score. 

Conclusion

Regardless, ad hominem is the sign of a man running out of arguments.  There aren’t many here to rebut, but the form of the complaints offered by Mr. Adams speaks volumes about how little the pro-nuclear camp has to offer right now in defense of nuclear power subsidies.

I have no animus towards nuclear power per se.  If nuclear power could compete without government help, I would be as happy as Mr. Adams or the next MIT nuclear engineer.  But I am no more “pro” nuclear power than I am “pro” any power.  It is not for me to pick winners in the market place.  That’s the invisible hand’s job.  If there is bad regulation out there harming the industry, then by all means, let’s see a list of said bad regulations and amend them accordingly.

But once those regulations are amended (if there are indeed any that need amending), nuclear power should still be subject to an unbiased market test.  Unlike Mr. Adams, I don’t want to see that test rigged.